Construction Claims

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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. (Click here for the six most common contractor claims, which includes change-in-scope claims.)

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

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

A performance bond ensures that the contractor or subcontractor that obtains the bond will complete its work under the parties’ contract. When a bonded contractor or subcontractor defaults, the surety that issued the bond should step in and exercise one of its options under the bond.

One of the surety’s options is to complete the defaulted contractor’s or subcontractor’s work. Frequently, the performance bond provides that a surety will not have an obligation to step up and complete the work unless the contract with the contractor or subcontractor has been terminated.

The United States Court of Appeals for the First Circuit very recently considered whether a surety was liable for over $3 million in remedial costs that a prime contractor incurred to repair the work of one of its bonded subcontractors. See Arch Ins. Co. v. Graphic Builders, LLC, 36 F.4th 12 (1st Cir. 2022).Continue Reading Surety Avoids Liability Because Subcontractor Was Never Terminated

In 2020, I read many articles addressing how contractors can mitigate the effects of COVID-19 on construction projects. I also wrote similar articles, including tracking COVID-19 impacts and whether a contractor can get more time and money due to COVID-19 impacts.

Fast forward to 2022 and the new hot topic is inflation. The cost of many things used to build a project have gone up significantly the last year and a half, including lumber and plywood (+101%), copper and brass mill shapes (+52%), plastic construction products (+45%), and gypsum or drywall (+29%).

As a result, many contractors are feeling the pinch of these increased costs and find themselves in a position where they may lose money on a project if construction costs do not go back down.

Public owners are addressing the impacts of inflation on existing and new contracts in different ways. For example, the United States Department of Defense (DOD) recently issued a memorandum providing guidance to contracting officers (COs) how to deal with the impact of inflation.Continue Reading How to Address Cost Increases Due to Inflation on Construction Projects

Unpaid subcontractors on federal government projects typically have payment bond rights that allow subcontractors to sue for payment to which they are entitled. There are many deadlines subcontractors must meet to preserve their rights under a payment bond. One deadline requires subcontractors to file a payment bond claim no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.

One year seems like plenty of time to file a payment bond claim, but you would be surprised how many subcontractors wait until the last possible second to file a payment bond lawsuit. That’s dangerous because it may subject an otherwise valid payment bond claim to the argument that it’s untimely because it wasn’t filed within one year of the last performance of the subcontractor’s work.

That’s exactly what happened in a very recent federal court case, United States ex rel. RCO Construction, LLC v. Federal Insurance Company. In that case,  a federal court judge provided one of the most thorough analyses of the one year statute of limitations for federal payment bond claims I have ever seen.Continue Reading The One Year Statute of Limitations for Subcontractor Federal Payment Bond Claims

Change-in-scope claims are one of the most common contractor claims. Typically, scope disputes center on whether work that the owner directed a contractor to perform was part of the original scope of the contractor’s work. If it was part of the original scope, then the contractor may not be entitled to additional compensation or time to perform that work. But if it was out-of-scope work, it may be a breach of contract for the owner to refuse to pay for that work.

At times, scope disputes can result in the termination of the parties’ contract. That’s what happened in a recent dispute between the federal government and a contractor in GSC Construction, Inc. v. Secretary of Army.Continue Reading Federal Court Rejects Scope-Change and Time-Extension Claims

The use of Dispute Review Boards on large public construction projects has become more and more common. Examples of public owners using DRBs on their projects include the Florida Department of Transportation, the Texas Department of Transportation, and the California Department of Transportation.

DRBs are usually comprised of one to three people who are appointed to the DRB to make recommendations about any disputes that arise on a project. Submission of a dispute or claim to the DRB may be a mandatory step that must be taken before anyone can file a lawsuit seeking additional compensation for work on a project.

Many times, the mandatory claims procedures in the contract between an owner and the prime contractor are flowed down to the subcontractors on the project. As such, there are several things that anyone, including subcontractors, working on a public project with DRB procedures should know.Continue Reading Three Things to Know About Construction Dispute Review Boards