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

There are many ways a project owner or contractor can breach a construction contract. The following is a list of the six most common types of claims a contractor may assert against an owner or a subcontractor might make against a prime contractor:

1. Payment claims: One very common dispute is where the owner fails to timely pay the prime contractor or the prime contractor does not pay a subcontractor on time. Cash flow is very important in construction. If the owner does not timely pay the prime contractor, then the prime contractor may have difficulty paying its subcontractors and the subcontractors may not be able to pay their sub-subcontractors and/or suppliers.

Many times, payment disputes turn on whether the owner had a valid reason for withholding funds from the contractor. For example, if the contractor has submitted a payment application for deficient work, then the owner should not have an obligation to pay for that work. But if it turns out that the work was not deficient, then the owner may have breached the contractor by not timely paying the contractor.


Continue Reading The Six Most Common Contractor Claims

There are two types of differing site condition claims–Type I and Type II claims. 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 DSC 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.

Both Type I and Type II DSC claims can be difficult to prove. Last week, after having a seven-day trial, a federal court rejected a subcontractor’s $2.4 million DSC claim in Phillips & Jordan, Inc. v. United States.

Continue Reading Federal Court Rejects Subcontractor’s $2.4 Million Differing Site Condition Claim

When unanticipated conditions impact a contractor’s ability to perform its work as efficiently as expected, the contractor may consider pursuing a lost productivity or inefficiency claim. There are many ways to price or calculate a contractor’s inefficiency claim damages, some of which can be quite “creative.” Despite the temptation to calculate inefficiency damages in a manner that will create the biggest claim possible, contractors are best served to make their claims as accurate as possible. That is especially true when a contractor must submit its claim to a government owner such as the federal government. In a very recent case, Lodge Construction, Inc. v. United States, the contractor learned its lesson the hard way regarding the submission of inflated inefficiency claims to the government.

In Lodge, the United States Army Corps of Engineers awarded a project to a contractor to rehabilitate a levee in South Florida, which was part of the Corps’ overall “Everglades Update” restoration mission. During construction, the contractor’s cofferdam breached in two sections, flooding the project site. Later, the contractor submitted several claims to the government for three alleged conditions that impacted the contractor’s performance, including constructive changes to the contract specifications and a differing site condition. The contracting officer denied those claims, and the contractor appealed the decisions by filing lawsuits with the United States Court of Federal Claims. Those lawsuits were consolidated, and a five-day bench trial was held regarding the contractor’s claims.

After the trial, the court issued a 46-page opinion in which the court essentially threw out the contractor’s nearly $4 million in collective inefficiency claims against the federal government, because the court found the contractor’s claims were fraudulent. In particular, the court concluded that the contractor’s claims were fraudulent in at least four ways:

Continue Reading How NOT to Price an Inefficiency Claim

Many construction payment disputes come down to one key question—who is responsible for extra costs incurred while building a project? Parties frequently have competing breach-of-contract actions that focus on who is liable. But a recent federal court case shows that you should not give short shrift to the damages that flow from the alleged breach.

In Barlovento, LLC v. AUI, Inc., Civ. No. 18-1112 GJF/JHR, 2021 WL 3879072 (D.N.M. Aug. 31, 2021), the United States Air Force awarded a general contractor a $5.5 million contract to renovate a taxiway at a military base. The general contractor then subcontracted the removal and replacement of the taxiway pavement and base course. This required the subcontractor to place three layers – subgrade, base course, and concrete.

The subcontractor fell behind in its performance of the work, and ultimately, the general contractor held a meeting with the subcontractor and a potential replacement subcontractor that would perform almost all the remaining work. At that meeting, the general contractor announced that it would take the concrete paving work away from the subcontractor. Despite the decision to de-scope the original subcontractor, the general contractor ended up terminating the subcontractor for default.

Continue Reading General Contractor Awarded $22,000 of Its $1.3 Million Claim Against a Subcontractor

In Cano, Inc. v. Judet, the Florida Fourth District Court of Appeal recently reaffirmed that when a contractor breaches a contract and the owner sues for breach of contract, the owner has three options for calculating its damages as follows:

  1. the owner may obtain the difference between the contract price and the additional money the owner spent to complete the project; or
  2. the owner can seek the difference between the value the construction would have had if completed and the value of the construction that had been performed before the contractor was terminated; or
  3. the owner can treat the contract as void and seek damages that will restore the owner to the position it was in before entering into the contract.

Courts refer to the first two options as the benefit-of-the-bargain remedy, which is intended to put the non-breaching party in the position it would have been in had the contract been completely performed.

Continue Reading Project Owner Damages When the Contractor Breaches a Construction Contract

One common request that I get from my contractor clients is to determine whether a client has a legitimate claim for additional time and money due to impacts arising out of a project. While each situation is unique, there are typically four steps a contractor should take to evaluate a potential claim or dispute:

Continue Reading Four Steps for Evaluating Construction Claims on Public Projects

Pay-if-paid clauses make a prime contractor’s payment to a subcontractor contingent on the prime contractor receiving payment from the project owner. A recent federal court case illustrates how the failure to include a pay-if-paid clause can end up with a prime contractor paying one of its subcontractors out of pocket.

In Phillips and Jordan, Inc. v. McCarthy Improvement Co., a prime contractor was awarded a design-build contract for the construction of a $31 million roadway project for the South Carolina Department of Transportation. The prime contractor, in turn, entered into a unit-price subcontract with a dirt-work contractor to excavate and place soil at the project.

Continue Reading Subcontractor Awarded $3.3 Million for Extra Work on a Roadway Project

In United States ex rel. Aarow/IET LLC v. Hartford Fire Insurance Company, an electrical subcontractor sued a general contractor and the payment bond surety for $2.9 million in additional labor costs incurred on a federal government project. The subcontractor alleged that the general contractor mismanaged the project and disrupted the subcontractor’s work. The general contractor filed a motion to dismiss, which the trial court granted because, among other reasons, the trial court believed that a no-damages-for-delay clause in the parties’ contract barred the subcontractor’s claim.

Continue Reading Court Concludes No-Damages-for-Delay Clause Did Not Bar Subcontractor’s Disruption Claim

Contractors and subcontractors that incur increased costs to complete their work due to delay or other impacts on a project sometimes have difficulty proving their damages. There are various ways to calculate those damages, but the surest way to have a claim rejected is by asserting a total cost claim.

Continue Reading Total Cost Claims—Frequently Rejected and Rarely Effective