When a contractor or subcontractor is terminated for default, the terminating party may seek its damages for completing the defaulted contractor or subcontractor’s scope of work. The cost to complete the work will almost always exceed whatever money was left in the contract to complete the work.

Construction contracts will often expressly allow the terminating party to obtain the above excess completion costs. And under Florida law, “controlling weight should be given to the actual expenditures, made in good faith, that are necessary to complete the job covered by the original contract.” R.K. Cooper Builders, Inc. v. Free-Lock Ceilings, Inc.

But what happens when the excess completion costs include the cost to construct a second building when only one building was contemplated under the parties’ contract?

Will those excess completion costs be considered a form of consequential damages that may be barred under the parties’ contract? A federal court recently considered that question in United States ex rel. Sustainable Modular Management, Inc. v. JE Dunn Construction Company.Continue Reading Does a Consequential Damages Waiver Bar the Recovery of Completion Costs?

When an owner provides design plans and specifications for building a project, there is an implied warranty that if the contractor follows those plans and specifications, a satisfactory result will be produced. This principle is called the Spearin doctrine, which comes from the United States Supreme Court case United States v. Spearin

Under the Spearin doctrine, if a contractor incurs additional costs due to the defective design of a project, the contractor may assert a defective specification claim, which may also be called a claim for breach of the implied warranty of design.

Generally, proving such a defective specification claim requires the contractor to show that the defective specification:

  1. was a design specification, not a performance specification;
  2. contained a latent (not obvious) error; and
  3. caused the contractor’s damages (e.g., additional construction costs).

Although it can be difficult to satisfy all three requirements, a recent Armed Services Board of Contract Appeals case–Appeal of KiewitPhelps–shows that it can be done. Continue Reading Contractor Wins on $40.7 Million Defective HVAC Design Claim

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.

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

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

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

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

Payment bonds protect subcontractors, sub-subcontractors, and others who provide labor and materials for a public project. Subcontractors and others who want to make a payment bond claim must follow the legally-required steps. The required steps depend on the type of project (e.g., federal and state government projects) and the role of the company making the claim (e.g., subcontractor, sub-subcontractor, supplier to sub-subcontractor, etc.). If you do not follow the steps by the required deadlines, you may lose your payment bond rights.

This post provides a high-level overview of the steps that must be taken to perfect a payment bond claim on most Florida state and federal public projects.Continue Reading How to Make a Payment Bond Claim on a Public Project

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