## Facts

- Covco Hawaii Corporation (Covco) entered into a construction contract with the United States Army Support Command, Hawaii Installation Club System (the government), a Department of the Army nonappropriated fund instrumentality.
- The contract required Covco to perform excavation work, including unspecified rock excavation.
- The worksite was in Hawaii, an area formed by volcanic processes.
- During performance, Covco encountered a solid lava rock ledge.
- Covco sought an equitable adjustment under the contract’s Differing Site Conditions clause.
- Covco argued that the contract’s profile drawings implied the excavation area contained soil rather than rock at the relevant depth.
- Covco asserted that solid lava rock ledges were not typically encountered in excavations to similar depths.
- Covco also asserted a superior knowledge theory, claiming the government had material information about subsurface conditions because it had previously built a pool in the same area and failed to disclose what it knew.
- The contract was a nonappropriated-fund contract not governed by the Contract Disputes Act (CDA) by statute.
- Covco invoked the Armed Services Board of Contract Appeals’ (ASBCA or Board) authority based on the contract’s disputes clause, which purported to grant Board jurisdiction; the summary indicates that without that clause, the contract would have been outside the Board’s jurisdiction.

## Issues

1. Whether the ASBCA had jurisdiction over this nonappropriated-fund instrumentality contract dispute based on the contract’s disputes clause, despite the CDA not applying by statute.
2. Whether encountering a solid lava rock ledge supported an equitable adjustment under the contract’s Differing Site Conditions clause, including whether the contract documents indicated different subsurface conditions.
3. Whether the government’s alleged nondisclosure of information from prior pool construction supported relief under a superior knowledge theory.

## Decision

- The Board treated the contract’s disputes clause as the basis for its jurisdiction over the appeal even though the CDA did not apply to the nonappropriated-fund contract.
- The Board addressed Covco’s differing site conditions theory by considering Covco’s claim that the profile drawings implied soil rather than rock and that the actual subsurface condition materially differed.
- The Board considered Covco’s superior knowledge theory based on the government’s alleged prior experience constructing a pool at or near the site and the claimed failure to disclose subsurface information.
- The publicly available case summary does not provide the Board’s final disposition on entitlement or quantum.

## Legal Principles

- For certain nonappropriated-fund instrumentality contracts outside the CDA, a board’s authority to hear an appeal may depend on an express disputes clause granting appeal rights.
- A differing site conditions claim typically requires proof that contract indications about site conditions were reasonably relied upon, that actual conditions materially differed, and that the difference caused increased cost or time.
- Superior knowledge liability generally requires proof that the government possessed material information affecting performance, the contractor lacked and could not reasonably obtain it, the government knew the contractor was unaware, and the government failed to disclose it, causing harm.

## Conclusion

Appeal of Covco Hawaii Corporation involved a nonappropriated-fund construction excavation dispute in which Covco sought an equitable adjustment after encountering a solid lava rock ledge, arguing differing site conditions and superior knowledge; the Board’s ability to hear the matter rested on a contractual disputes clause rather than the CDA, and the available summary confirms the jurisdictional basis and the theories presented but does not state the final outcome.


Appeal of Covco Hawaii Corporation, Exchange Act Release No. 31,554 (Dec. 3, 1992)