COFC Rejects the Government’s Effort to Dismiss Constructive Change Claim
The contractor alleged that the government constructively changed the contract by demanding immediate surety intervention. The government moved to dismiss, arguing the contractor failed to provide timely notice of the change and that the contract already contemplated surety involvement. The Court of Federal Claims denied the motion, finding the contractor sufficiently alleged that the government knew or should have known its demand constituted a change, and that the contract contained no provision authorizing such intervention.
Oxford Federal, LLC v. United States, United States Court of Federal Claims, No. 23-cv-0288
Background – The Army Corps of Engineers awarded Oxford Federal, LLC a construction contract for facilities in Israel. After Oxford fell behind schedule, the Corps issued a “Suspension of Work” letter citing deficient concrete work. The letter demanded “immediate intervention by the surety to address the increasing risk of contractor failure.” Oxford’s surety hired an outside construction consultant who worked directly with the Corps, costing Oxford $115,762.50. The Corps later terminated the contract for default. Oxford filed suit alleging multiple claims, including that the letter imposed a constructive change by requiring the surety to intervene at Oxford’s expense.
Notice Exception – Oxford did not provide written notice of the alleged constructive change within 20 days as required by FAR 52.243-4(d). The government argued this failure was fatal to Oxford’s claim. However, courts recognize exceptions to strict enforcement of notice requirements, including when the government has “actual or imputed notice of circumstances giving rise to the claim.” The Court found Oxford’s allegations sufficient at the pleading stage. Oxford alleged the Contracting Officer communicated directly with the surety’s consultant about material work aspects, that Oxford “adamantly disagreed” with the suspension, and that the government knew or should have known the demanded intervention wasn’t contractually authorized. From these facts, the Court could reasonably infer the government knew Oxford regarded the letter as a change requiring compensation.
Constructive Change – The government argued Oxford failed to plausibly allege a constructive change because surety communications are contemplated by FAR 49.402-3(e)(2), which requires notification to sureties when default termination appears imminent. The Court rejected this argument for several reasons. First, the Contracting Officer didn’t cite FAR 49.402-3 in the letter—the officer instead cited a different provision entirely. Second, the letter provided no indication of imminent default; the Corps didn’t issue a cure notice until two weeks later. Third, the letter requested “immediate intervention,” which differs from mere notification. The Court found the contract contained no language authorizing the government to demand active surety involvement in contract performance, making Oxford’s constructive change claim plausible.
Causation – The government argued it couldn’t be liable for the surety’s independent decision to hire an outside consultant. The Court found this argument premature at the motion-to-dismiss stage. Oxford alleged the Contracting Officer ordered surety intervention, without which Oxford wouldn’t have incurred additional costs. While the officer didn’t explicitly order hiring a consultant, the circumstances raised questions about what other form of “intervention” was contemplated. Causation issues—whether cost increases were the direct and necessary result of the alleged change—are typically resolved at summary judgment or trial after discovery, not on a motion to dismiss.
The plaintiff is represented by Michael H. Payne and Stephen D. Tobin of Cohen Seglias Pallas Greenhall & Furman PC. The government is represented by Matthew J. Carthart, Yaakov M. Roth, Patricia M. McCarthy, and Douglas K. Mickle of the Commercial Litigation Branch, Civil Division, United States Department of Justice.
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