Department of General Services v. Harmans Associates Limited Partnership

The Maryland Department of General Services (DGS) (plaintiff) wanted to construct a new State Highway Administration facility on a plot of state-owned, unimproved land. Rather than undergoing a competitive construction contract procurement process, DGS entered into a contract with Harmans Associates Limited Partnership (Harmans) (defendant) under which Harmans would (1) lease the state-owned, unimproved land from the state for 16 years; (2) build a facility largely in compliance with the government’s conceptual plans and technical specifications; and (3) sell the completed facility to DGS for $10.9 million and sublease the land back to DGS for the remainder of the 16-year lease term. The request for proposals (RFP), through which DGS solicited bids for the sale-and-leaseback construction project, including Harmans’s successful bid, contained 48 foundation boring logs, the most accurate test for subsurface conditions, which indicated that the site contained three-to-six inches of topsoil. The RFP also stated that the included conceptual plans and technical specifications were not construction specifications and that DGS disclaimed any responsibility for site conditions differing from those indicated in the RFP. Harmans’s contract did not include a differing-site-conditions clause. After completing construction, Harmans submitted an equitable-adjustment claim to DGS for unexpected site conditions. Harmans stated that it found approximately two feet of topsoil rather than the three-to-six inches indicated in the RFP, forcing Harmans to excavate roughly 12,000 cubic yards more topsoil than expected. DGS denied Harmans’s claim. Harmans appealed to the Board of Contract Appeals (Board), which granted Harmans’s claim. DGS appealed, arguing that (1) the contract was a real estate contract, not a construction contract; and (2) the waivers in the RFP prevented the application of the statutory differing-site-conditions clause.