The Federal Government's Implied Duty of Good Faith and Fair Dealing to Contractors
Summer 2014

Earlier this year, U.S. Court of Appeals for the Federal Circuit clarified previously misinterpreted case authority and reaffirmed that the federal government owes the same implied duty of good faith and fair dealing to its contractors as do private parties. In Metcalf Construction Company, Inc. v. United States, 742 F3d. 984 (Fed.Cir. 2014), a construction contractor brought a lawsuit against the federal government alleging that the Navy breached its duty of good faith and fair dealing under a contract to design and build military housing. In 2002, the Navy awarded Metcalf a contract to design and build housing units at Marine Corps Base Hawaii. Due to undisclosed site conditions, Metcalf had to deal with unusual expansive properties and chemical contamination in the soil. These conditions required Metcalf to excavate the unsuitable soil and replace it with fill dirt.

Other disruptions and interruptions also occurred during the course of the project. For example, the Navy imposed requirements not found in the written contract and an uncooperative inspector hindered construction. Following completion of the project, Metcalf submitted a claim for damages to the contracting officer seeking compensation for a cost overrun in excess of $26 million. Metcalf argued that the Navy had materially breached the contract, including the implied duty of good faith and fair dealing. The contracting officer denied the claim.

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