EQUAL IGNORANCE CLAIMS AND THE ALLOCATION OF RISK

You are blindsided.  You were unaware a designated and required component had design flaws making compliance with contract terms practically impossible. The government had a long history with your predecessor's performance but also did not know of the subcontractor's issues.  You think you probably do not have a superior knowledge claim.  Or do you?

Courts and boards have long recognized an implied by law duty of the government to disclose information vital to contract performance.  Helene Curtis Industries v. United States, 315 F.2d 774 (Ct. Cl. 1963).  The elements of a claim for breach of this duty are: (1) possession of information the government knows or should have known is material to successful contractor performance; (2) the contractor neither knows nor should have known of the information through normal reasonable investigation; (3) the government knows or should have known of the contractor's ignorance; (4) the government fails to disclose the information; and (5) the contractor suffers injury as a result.

Any information significant to a proper appraisal of the cost and scope of the work falls within the rule.

One aspect of this rule which often is overlooked is what we can call "equal ignorance".  In a way, it is the corollary of the "should have known" rule.  It is also based on an old rule from what is now known as the Court of Appeals for the Federal Circuit (CAFC).  Aerodex, Inc. v. United States, 417 F.2d 1361 (Ct. Cl. 1969).  In Aerodex, a vital component part needed for contract performance was described in the specifications by dimension and performance requirements.  The contractor discovered during production that the government lacked the material specifications necessary to produce the component and therefore the contractor was unable to procure the component from the sole source supplier.  The court held it was reasonable for the contractor to expect the part to be available and the court concluded that the government, being in the better position to know the information, must bear the risk of the costs of failure to perform.

Enter the equitable allocation of risk.

The contractor and the government may be equally ignorant of the information vital to successful performance.  However, the government may be in a better position to know and therefore the risk of performance extra costs is allocated to the government.  So, don't forget the Aerodex rule.  The government may well be allocated the risk of extra performance costs if it is in the better position to know or should have known as originally articulated in Helene Curtis, the seminal case on superior knowledge.

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