New Federal Circuit Guidance Regarding Patent and Latent Ambiguities

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Stephanie M. Harden, Patrick F. Collins, and Ustina M. Ibrahim*

Stephanie Harden's Headshot Photo

Ambiguities in a solicitation or contract have long been one of the greatest traps for unwary contractors. At the solicitation phase, a failure to identify a “patent” (i.e., obvious) ambiguity often results in the contractor losing the competition with no viable bid protest challenge. This is because such ambiguities are construed in the agency’s favor. A contractor seeking to recover added costs based upon an ambiguous contract term will be unable to recover such costs if the ambiguity is “patent” and the Government disagrees with the contractor’s interpretation.

Traditional Test for Patent vs. Latent Ambiguities

So how does one distinguish between “patent” and “latent” ambiguities? Numerous Federal Circuit authorities tell us that a patent ambiguity arises where there is “an obvious omission, inconsistency or discrepancy of significance” that “could have been discovered by reasonable and customary care.” E.g., Per Aarsleff A/S v. United States, 829 F.3d 1303, 1312-13 (Fed. Cir. 2016) (internal quotations omitted). By contrast, a latent ambiguity is a “hidden or concealed defect which is not apparent on the face of the document, could not be discovered by reasonable and customary care, and is not so patent and glaring as to impose an affirmative duty on plaintiff to seek clarification.” Id. (internal quotations omitted).

If the ambiguity is “patent,” the onus is on the contractor to timely ask the Government to clarify the matter—i.e., before the deadline for submission of proposals.

New Federal Circuit Guidance

A recent Federal Circuit decision elaborates upon the “discrepancy of significance” component of the “patent” ambiguity test noted above, holding that the “importance of the [item] to the overall project” may be the determining factor in this analysis. Lebolo-Watts Constructors v. Secretary of the Army, Case No. 2021-1749 (Fed. Cir. Feb. 18, 2022). In so holding, the Federal Circuit agreed with the Armed Services Board of Contract Appeals that an ambiguity was patent because the importance of the item at issue (circuit breakers) meant that the ambiguity over whether the contractor or the Government would provide the item should have been apparent to the contractor.

While the shift in Lebolo-Watts from “discrepancy of significance” to “importance to the overall project” is subtle, it is a shift nonetheless. The inquiry is no longer solely about the “significance” of the discrepancy, but can also turn on the significance (or, in the words of the Federal Circuit, “importance”) of the item subject to the ambiguity. In other words, where an item or component of the contract is essential or important to the overall project, the burden will be on the contractor to detect any ambiguities pertaining to that item.

Key Takeaways

Lebolo-Watts confirms the long-standing rule that the contractor is charged with identifying and clarifying patent ambiguities, while now also putting contractors on notice that this will be critical where the ambiguity pertains to an “important” or essential aspect of the work. It is difficult to imagine an ambiguity that is dispositive in the context of the evaluation of proposals that would not be “important” to the overall project. Likewise, in the context of a claim, it is difficult to imagine an ambiguity that leads to significant added costs that is not “important” to the overall project.

Contractors should, therefore, double down on their efforts to timely identify and clarify ambiguities. We can expect to see little to no latitude granted to contractors who fail to clarify essential elements of their work scope.

*Ustina Ibrahim is a law clerk in Blank Rome’s Government Contracts practice group.

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