If a project takes longer than expected due to unforeseeable reasons beyond the contractor’s control, then the contractor may have a delay claim against the owner. Typical delay-claim damages include extended general conditions, home office overhead, and financing costs.

Delay claims are one of the most common issues that arise on construction projects. Typically, the burden is on the contractor to prove a delay claim, and the contractor must prove the following three elements:

  1. the length of the delay;
  2. the causal link between the delay and the owner’s wrongful acts; and
  3. the harm to the contractor due to the delay (i.e., the contractor’s damages).

The second element can be the most difficult to prove. To show a causal link between the owner’s wrongful acts and the delay, the contractor must show that the owner’s actions affected the activities on the critical path of the project.

Continue Reading No Critical Path Analysis for a Contractor Delay Claim? Expect Your Claim to Be Denied.

When a subcontractor goes unpaid on a public project, the subcontractor will almost always demand to be paid by the surety that issued the payment bond for the project. Sureties have many defenses to bond claims.

One of their favorite defenses is that the surety’s liability is coextensive with that of its principal’s (i.e., prime contractor’s) liability under the subcontract. In other words, sureties like to argue that unless the prime contractor is liable under the subcontract, the surety has no liability to the subcontractor for unpaid work.

Many courts have addressed the above “coextensive liability” argument and at least some have generally agreed that the surety’s liability is coextensive with the prime contractor’s liability. But there are courts that have found exceptions to that general rule under the federal law governing performance and payment bonds on most federal projects–the Miller Act.

Continue Reading Surety Liability – Not Always Limited to the Principal’s Liability

Disputes regarding a contractor’s scope of work are common. Frequently, there are times when a contract or solicitation is unclear as to whether a certain item of work is within a contractor’s scope.

In federal government contracts, if a contract is ambiguous as to whether a contractor must perform a specific item of work, the issue may turn on whether it was a patent or latent ambiguity. A patent ambiguity is one that is readily apparent or obvious. In contrast, a latent ambiguity is one that is hidden or could not be discovered through the exercise of reasonable care.

The distinction is important because if an ambiguity as to whether a contractor has to perform a specific item of work is patent or obvious, the contractor has an affirmative duty to seek clarification before submitting its proposal. If the contractor fails to seek clarification, the ambiguity must be construed against the contractor.

Continue Reading Change-in-Scope Claims: Patent vs. Latent Ambiguities

If a construction contractor working on a federal government project is impacted by a government-caused change, the contractor must take steps to preserve its right to obtain additional compensation or time to complete the project. In particular, a contractor must comply with the contract’s claim process. (Click here for the six most common contractor claims.)

Generally, there are three steps to obtaining additional money or time on a federal government project:

1. Submit a request for equitable adjustment: If the government causes a change to the project, the contractor should submit an REA that explains the change, how that change has impacted the contractor’s work, the amount of additional money and/or time to which the contractor is entitled, and backup for the amounts claimed.

Although a contractor is not required to submit an REA before submitting a formal claim, contractors frequently submit the REA first, because it can serve as a starting point for the contractor and the contracting officer to negotiate. The main downside to submitting an REA rather than a claim is that interest will not to start running until a claim is submitted. Also, there is no deadline for the contracting officer to make a decision on an REA.
Continue Reading How to Get More Money and Time on Federal Government Construction Projects

As I have stated before, differing site condition claims remain fairly common. They can also one of the most difficult claims for a contractor to prove at trial. There are two types of differing site condition claims–Type I and Type II.

Generally, a contractor may make a Type I differing site condition claim where the contractor encounters a subsurface or latent physical condition at the project site that differs materially from the conditions indicated in the parties’ contract.

Under a Type II claim, a contractor may assert a differing site condition claim where there are unknown and unusual physical conditions at the project site that differ materially from those ordinarily encountered and generally recognized as inherent in work of the character provided for in the parties’ contract.

The United States Court of Federal Claims recently considered a contractor’s $10.5 million differing site condition claim in Nova Group/Tutor-Saliba, Joint Venture v. United States.

Continue Reading Contractor’s $10.5 Million Differing Site Condition Claim Torpedoed

I recently gave a presentation on essential construction contract provisions at the annual conference for the Florida Municipal Attorneys Association. Part of my presentation addressed liquidated damages clauses in government construction contracts. After speaking, I was approached with follow-up questions about how to determine the proper daily rate for liquidated damages in construction contracts.

A liquidated damages clause is an owner-preferred contract provision that usually sets a fixed amount for which the contractor is liable to the owner if the project is not finished on time. Often, the amount is set as a certain sum of money per day the project is late (e.g., $1,000 per day).

Generally, liquidated damages provisions are enforceable. But there are circumstances where courts will refuse to enforce such a provision (click here for a recent Florida case where the court found a liquidated damages provision unenforceable).

Continue Reading Court Finds Liquidated Damages Clause Unenforceable

Sureties have many defenses that they like to assert to avoid paying under a performance bond. One of those defenses arises when the obligee (usually the owner or the general contractor terminating a subcontractor) precludes the surety from exercising one of its options under the bond.

While performance bond terms vary, a surety frequently has three options under the bond where a bonded contractor has been default terminated:

(1) the surety can step in and complete the defaulted contractor’s work;

(2) the surety can obtain bids from other contractors to complete the defaulted contractor’s work and tender a new contractor to complete the work; or

(3) the surety can simply pay the obligee (again, typically the owner or the general contractor that defaulted a subcontractor) the cost above the remaining contract balance to complete the defaulted contractor’s work.

If a surety perceives that it was not given a chance to exercise one of its options under the bond, you can rest assured that the surety will argue it is no longer liable for any of the excess completion costs.

The you-deprived-the-surety-of-its-completion-rights defense is playing out in real time right now in a pending lawsuit between a surety and a contractor in Western Surety Company v. PCL Construction Services, Inc.

Continue Reading Another Performance Bond Surety Defense – Impairing a Surety’s Completion Options Under the Bond

When submitting a bid for a public construction project, a contractor is typically required to submit a bid bond along with its bid. A bid bond is a written agreement under which a surety agrees to pay a specific amount to the owner if the contractor refuses to enter into a contract for the project.

In other words, if a contractor does not honor its bid that included a bid bond, the surety will usually be required to pay for the owner’s excess reprocurement costs. Those costs may included the difference in price between the low bid and the next lowest bidder along with the owner’s administrative reprocurement costs.

Continue Reading The Importance of Submitting a Proper Bid Bond

If a contractor is unable to perform its work as efficiently as expected due to the actions of other project participants, the contractor may incur loss of productivity damages. There are many ways to price those types of damages. Some methods are better than others, but the least accepted method is the total cost method.

Under the total cost method, the contractor shows the amount it cost to complete its work and subtracts the contract amount. For example, if the contract amount was $10 million, but it cost the contractor $15 million to complete its work, the contractor might claim that it is owed $5 million.

Courts frequently reject the use of the total cost method because it does not take into account damages that are the result of the contractor’s unrealistic bid or the contractor’s own improper performance of its work.

Continue Reading Subcontractor’s Modified Total Cost Claim Allowed to Proceed to Trial

One federal government agency has instructed its contracting officers to deny contractor claims for additional compensation due to inflation-related material price escalations. The only exception to that instruction is where the contract contains an economic price adjustment clause. But does a contractor have any other avenues for relief where the contract does not have an EPA clause?

One potential option for contractors may be through common law economic excuse doctrines. For example, under the doctrine of commercial impracticability, a contractor could argue that its performance should be excused because the construction material cost increases were not foreseeable by either the owner or the contractor.

Continue Reading Contract Excuse Doctrines and Contractor Claims for Material Price Increases