US Court of Appeals for the Federal Circuit

Case no.: 2024-2232
Date filed: April 9, 2026

A federal appeals court has ruled that drawings and specifications called for improvements to a non-existing chilled water system. The contractor had admitted it was aware of the mistake when it bid the work. The government was entitled to a credit when it deleted the improvements after contract award.

The U.S. Army solicited bids for construction of an aircraft hangar at Tinker Air Force Base in Oklahoma. The specifications for the work included the following provision: “Extend the base wide chilled water, hot water, and compressed air piping to the slab edge of the hangar. Provide construction location for future projects.” Schematic drawings in the contract documents clearly depicted chilled water supply and return lines. However, there was no pre-existing base wide chilled water system to extend at Tinker Air Force Base.

The Army awarded the contract to Korte Construction Co. for approximately $72.8 million. After contract award, the Army discovered its error, deleted the chilled water lines from the work, and took a credit of $493,639 against the contract price.

Korte challenged the Army’s entitlement to the credit. The contractor argued the contract had never included the chilled water line work. The specification referring to that work had to be read to exclude the work, as it was impossible to extend a nonexistent chilled water system. While the drawings depicted those lines, the specifications governed the drawings.

The Army responded there had been an error in the contract documents. Korte could not simply ignore the specification reference to the chilled water lines, notwithstanding the impossibility of performance. The specification and the drawings had to be read together. If that resulted in an ambiguity, Korte had a duty to seek pre-bid clarification, which it failed to do. The Armed Services Board of Contract Appeals (ASBCA) agreed with the Army and upheld the credit. Korte Construction appealed.

The U.S. Court of Appeals for the Federal Circuit said the determinative question was whether or not the chilled water lines had been included in the original contract. The court agreed with the ASBCA that the contractor could not use the doctrine of “impossibility” to read the specification out of the contract. Impossibility occurs when, after contract award, an event not contemplated in the contract renders performance of the contract impracticable. Here, under Korte’s reading of the contract, it was the contract itself that rendered performance impracticable.

The court said the specification and the drawings, when harmonized to give reasonable meaning to both, required installation of the chilled water system improvements. The court acknowledged there was arguable ambiguity in the contract documents. The Army and Korte had argued at length whether that ambiguity was latent or patent. The latter would have triggered Korte’s duty to seek pre-bid clarification. The court did not need to resolve that issue. Korte had admitted it was aware of the error prior to bid submittal.

In the contractor’s request for a final claim decision from the government contracting officer, Korte said the reference to chilled water system improvements was “obviously the product of a scrivener’s mistake—one which was recognized during the development of Korte’s pricing.” This was an admission Korte was aware of the problem at the time of bidding and chose to simply ignore the specification and the drawing depictions.

“We conclude that the [contract] required the chilled water improvements, and therefore the Army has satisfied its burden to show that it was entitled to a refund for the work thereafter deleted from the [contract]. Korte has not challenged the amount of the refund award. For the foregoing reasons, we affirm.”

It appears the contractor was initially arguing that because it knew of the error, it excluded the work from its bid price, thereby denying the government the right to a credit. When the determinative issue became simply the contractually required scope of work, the contractor was caught flat footed.

Shifting or evolving theories in support of a claim can leave a trail of detrimental correspondence or other documentation.

Participants:
For Korte Construction: Michael Wilson, St. Louis, Missouri
For the Secretary of the Army: Patricia M. McCarthy, Washington, D.C.

Before: Judges Hughes, Linn, and Stoll

Opinion by: Judge Linn

Outcome: Government credit against contract price affirmed

Source: Please click here to read the complete opinion.