Board Rules Contractor Entitled to Additional Costs After Government Unreasonably Refuses to Accept Equivalent Substitute

In Appeal of Carothers Constr., Inc., the Armed Services Board of Contract Appeals (the “Board”) rejected the Government’s reliance on strict compliance with the material specifications for a 2 1/2″ thick roof deck product when the contractor proved the substitute 2″ thick roof deck was equivalent. While generally, the owner is entitled to strict compliance with its plans and specifications, this rule does not apply when the contractor is permitted to submit a functionally equivalent substitute for a proprietary item that is specified in the contract documents.

On December 15, 2015, the United States Air Force issued a solicitation for the phased replacement of elementary/middle school at an air force base. The solicitation included FAR 52.236-5, the Material and Workmanship clause. As part of the phased construction of the school, the contract included a 2 1/2″ thick acoustical roof deck for the roof system over the gymnasium and performance area of the school. From its investigation, Carothers Construction, Inc. (“Carothers”) found that only one manufacturer, Epic Metals made a roof deck that was 2 1/2″, which was the Toris A roof deck product. Carothers’s investigation also showed that the 2″ Versa-Deck product was equal to the Toris/Epic Metal product. Accordingly, Carothers bid the subject contract with the expectation it would use the Versa-Deck roof system.  The Government awarded the contract to Carothers.

During the course of the project, Carothers submitted an RFI (“Request for Information”) seeking approval of the 2″ Versa-Deck as a suitable alternative to the 2 1/2″ Toris A (Epic Metals Corporation). The Government rejected the proposed alternative. Despite the fact that the contractor showed that the 2″ Versa-Deck met or exceeded the span/load and noise reduction requirements in the contract and was therefore an acceptable substitution for the specified roof system product, the Government would not budge on its insistence on the 2 1/2″ roof deck. The contractor then provided the proprietary deck and submitted a certified claim seeking its additional costs. The Government denied the claim for additional compensation, which the contractor appealed to the Board contending that the 2 1/2″ roof deck specification was proprietary and under the Material and Workmanship clause, the contractor was permitted to submit the 2″ Versa-Deck product as a functional equivalent. The Government argued that it should be entitled to strict compliance and it would only consider the 2″ Versa-Deck as a variation to the contract specifications.

The Board rejected the Government’s insistence on the 2 1/2″ roof deck and held that the contractor was entitled to substitute the 2" deck pursuant to pursuant to FAR 52.236- 5, the Material and Workmanship clause. A contractor is permitted to furnish a functionally equivalent item when it can show: (1) the specifications are proprietary; (2) the contractor submitted a substitute product along with sufficient information for the contracting officer to make an evaluation of the substitute; and (3) the proposed substitute meets the standard of quality represented by the specifications.

In this case, the contractor was able to prove the 2 1/2″ roof deck was proprietary because it found only one vendor that manufactured such a roof deck, and the government was unable to rebut this finding by showing that it could be obtained from more than one source. The Board explained the contractor had a right to propose an equal substitute because the inclusion of the FAR 52.236- 5, Material and Workmanship clause qualifies the general rule that the Government is entitled to strict compliance with every technical requirement of the contract. The contractor was also required to prove that the Contracting Officer’s refusal to consider the equivalency of the proposed substitute was an “unreasonable exercise of judgment.” The Board found that Carothers provided sufficient documentation to the Contracting Officer, including technical findings of a third-party structural engineer retained to evaluate the equivalency of the proposed alternative showing that the 2″ deck was equal in quality and performance to the roof deck specified in the contract. However, the record reflected that the Government never evaluated the side-by-side comparisons of the 2″ deck and 2 1/2″ roof deck submitted by the contractor, and seemingly ignored the third-party engineer’s equivalency determination. Accordingly, the Board held that the Government’s insistence on the 2 1/2″ roof deck was an unreasonable exercise of judgment given all of the documentation evidencing that the 2″ deck was equal in quality.

Although the Government can generally demand strict compliance with the contractual specifications, this case explains that if a contract includes FAR 52.236-5, the Material and Workmanship clause, then the contractor is permitted to propose an equal substitute. However, contractors should bear in mind that it is their burden to prove equivalency of the proposed alternative to the Government.