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Dugan Construction Co., Inc. v. New Jersey Turnpike Authority

February 29, 2008


On appeal from the Superior Court of New Jersey, Law Division, Burlington County, L-2185-02.

The opinion of the court was delivered by: S.L. Reisner, J.A.D.



Argued January 28, 2008

Before Judges S.L. Reisner, Baxter and King.

Plaintiff Dugan Construction Co., Inc. (Dugan) appeals from a February 21, 2007 order of the trial court granting summary judgment dismissing plaintiff's complaint against defendant New Jersey Turnpike Authority (NJTA).

This case arises from a contract between Dugan and NJTA for remediating polluted groundwater. Dugan claimed $9.5 million for disposing of approximately 200,000 gallons of non-hazardous wastewater, although its bid of fifty dollars per gallon was based on NJTA's estimate that the project would produce only fifty-five gallons of wastewater. The trial judge dismissed Dugan's complaint based on the doctrine of patent ambiguity. We conclude that the contract estimate was a mistake, rather than an ambiguity, and that the correct remedy is reformation of the contract. Based on undisputed evidence concerning the reasonable price of disposal, we order that the contract be reformed to provide Dugan compensation of $52,330.


These undisputed facts are drawn from the record before the trial court.*fn1 On July 18, 2000, NJTA issued an advertisement inviting proposals for a contract that required remediation of soil and groundwater at the James Fenimore Cooper Service Area, located at exit 4N on the New Jersey Turnpike.

The proposed contract included both the excavation and removal of contaminated soil and the remediation of polluted groundwater. The specifications required that one of two possible remediation techniques be employed for the groundwater: "water jetting" or the "surging and pumping" method. The specifications provided a detailed description of the procedures for each method. Under the jetting method, the specifications required the contractor to maintain a uniform jetting of forty gallons per minute (gpm) for seventeen groundwater excavation wells. The specifications further required that the "well development" water from the extraction wells be stored in tanks on-site and then be trucked to a disposal site. However, the contractor was not responsible for the cost of disposal; the NJTA was to pay the municipal utilities authority for the cost of disposing of the water.

The specifications included a "Scheduled Items of Work" form that required bidders to submit unit prices for thirty-seven scheduled items of work. Many items of work were described in terms of approximate quantities. For example, for "Transportation and Disposal of Contaminated Soil - Non Hazardous," the form listed 250 tons, and Dugan bid $100 per ton. Dugan bid $400 per ton for transportation and disposal of "Contaminated Soil - Hazardous." Item 28, which is at issue in this case -- "Storage, Handling and Transportation of Liquid Wastes-Non-Hazardous" -- listed an approximate quantity of fifty-five gallons, for which Dugan bid $50 per gallon, for a total estimated price of $2750. Notably, for item 29 on the list, "Storage, Handling and Transportation of Liquid Wastes-Hazardous," Dugan bid $4 per gallon to dispose of a projected 2200 gallons.

The contract also included the New Jersey Turnpike 1987 Standard Specifications (the specifications), which detailed how the work was to be performed. Subsection 102.06 of the specifications, titled "Approximate Quantities," provided the following:

The quantities of the several Scheduled Items of Work involved in the performance of the Project and stated in the Proposal are estimates only and the actual quantities may be greater or less, or items may be eliminated entirely. Payment will be made only for the actual quantity of authorized work performed under each Scheduled Item.

The contract required bidders to examine the bid documents and bring ambiguities or errors to the attention of the Chief Engineer on the project:

Prospective Bidders must examine the Contract Documents carefully before bidding and must request the Chief Engineer in writing for an interpretation or correction of every apparent ambiguity, inconsistency or error therein.

If the Bidder, prior to the submission of his bid, fails to call the Chief Engineer's attention to the existence of any apparent ambiguity, inconsistency or error in the Contract Documents, his Bid will be conclusively presumed to have been based upon the interpretation of such ambiguity or inconsistency, or the directions correcting such error, which may subsequently be given [by] the Engineer.

Section 1.4.9 also provided that the contractor "shall verify all field conditions as affect his work, and shall report to the Engineer any errors, discrepancies or inconsistencies in the Specifications or Plans, and shall await instructions before proceeding with the work." Section 1.3.3 permitted the Chief Engineer to "make changes in the Plans and Specifications at any time by a written order" and provided that if a change involved an increase of more than 25% of a projected quantity, and a cost increase "amounting to . . . more than 25% of the total cost of the project," the increased work would be subject to a negotiated price.

Plaintiff proposed a total bid of $1,696,000, which NJTA accepted, and the contract was signed by both parties on October 11, 2000. NJTA also contracted with Camp, Dresser & McKee (CDM) and URS Corporation (URS) for this project. CDM was hired to perform design services, and URS was hired to act as an authorized representative of NJTA's Chief Engineer for the project.*fn2 In that capacity, URS provided site inspectors on the job.

Initially, plaintiff elected the surging and pumping method when it bid $50 per gallon. Before commencing the work, Dugan decided to subcontract the groundwater removal. On December 5, 2000, Carl Zeroski of Dugan obtained a proposal from the subcontractor, JCA Associates, for the two methods of water remediation allowed by the contract. JCA's estimate for the surging and pumping method called for pumping and removal of 42,840 gallons of water at a basic cost of $26,150, with a possible addition of $5500 if the holding tanks ("frac tanks") were located more than 100 feet from the well heads. For the water jetting method, JCA estimated the need to remove 255,680 gallons of water at a basic price of $57,065. On December 15, 2000, Zeroski sent notice to the URS site inspector that Dugan would use the water jetting method. Dugan arranged with JCA to perform the work, and, on December 21, 2000, Dugan applied to the Mount Holly municipal utilities authority (MUA) to bring up to 200,000 gallons of wastewater to the MUA for disposal.

Dugan did not copy the NJTA on its correspondence to the MUA. Nor did Zeroski's faxed letter of December 15, 2000 to the site inspector, Romulus Celan of URS, notifying Celan that Dugan would "utilize the Water Jetting method," make any mention of the increase in water quantities that this would entail.

Indeed, there is no dispute on this record that although Dugan knew as early as December 5, 2000, that the NJTA contract's fifty-five gallon estimate for disposal of wastewater must have been an error, or at least a gross underestimate, Dugan did not bring this to the attention of the Chief Engineer.*fn3

Carl Zeroski admitted this in his deposition. When asked "did you or anyone from Dugan say we think we're going to overrun this quantity by X gallons?" Zeroski replied "No, I don't think any anyone ever said we're going to overrun by X gallons." He also admitted that Dugan did not convey to NJTA the information given to the MUA, that Dugan intended to dispose of 200,000 gallons of wastewater.

Instead, without giving advance notice of the contract error to the NJTA, Dugan proceeded to pump thousands of gallons of water into and out of the wells. The pumping work began on December 20, 2000, shortly before the Christmas holidays, and was completed by January 4, 2001, although the last of the contaminated water was not trucked off the site until January 12. Zeroski's contention at his deposition was that during this time, Dugan provided daily well logs to a site inspector, who signed the logs and should have figured out that Dugan was exceeding the contracted quantities of wastewater.*fn4 It is clear from ...

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