Volume: 16, Issue: 17 - 09/15/2018
What prudent businessperson would not like to be paid in advance for work? The cost of performance, which is fundamentally the cost of capital, is shifted to the customer. Construction contractors have a long history of attempting to “front load” their contract pricing into the early phases of a project, effectively recouping performance costs before those costs are incurred.
For project owners, the dangers of front-loaded pricing are apparent. It can result in a loss of contractor incentive for expeditious project completion and weaken a contractor in the latter stages of performance. In the event of a default, the owner is financially exposed. Performance bonds are reassuring, but provide an incomplete form of protection. Read more.
Even though a procuring agency knew, prior to contract award, that performance costs had been front-loaded into the mobilization price on a bid, the agency could still, after contract award, invoke the “Payment for Mobilization and Demobilization” clause and defer payment of those performance costs until project completion.
Three claimants vying for recovery from the same pool of money held by the project owner each required separate counsel. Representation of multiple claimants presented a conflict of interest.
Volume: 16, Issue: 16 - 08/31/2018
When a federal contractor seeks a price increase, the contractor may submit an informal request for a price adjustment or a formal “claim.” Under the Contract Disputes Act, a claim that exceeds $100,000 must be certified for accuracy. The government contracting officer issues a final decision on the claim, which triggers a 90-day appeal period. If the contractor misses the statutory deadline, the contractor loses its appeal rights.
This raises a question: Can the government issue a final decision on an uncertified request in excess of $100,000, triggering the appeal period even though the contractor did not submit a claim? The answer, surprisingly, is yes. Read more.
When the government responded to a contractor’s uncertified request for a price adjustment with a contracting officer’s final decision, that decision effectively asserted an affirmative government claim for an offset. This triggered the statutory 90-day appeal period. The contractor could not revive its appeal rights with a subsequent certified claim.
A proprietary specification conflicted with a limitation of subcontracting clause. The solicitation
was flawed. A would-be bidder could recover its protest costs, including attorney fees, but not its
bid preparation costs.
Volume: 16, Issue: 15 - 08/15/2018
Notice of claim clauses are common in construction contracts. The contractor must give timely written notice of an alleged change or else the contractor waives the right to additional compensation. Some of these clauses simply address the project owner’s reasonable need to manage its project and control its budget. But some are designed as lethal traps to defeat contractor claims for changed work. Read more.
A changes clause in a public works contract distinguished between directed changes and constructive changes – requiring timely written notice from the contractor – based on the subjective belief and intention of the owner’s representative. The rep’s subjective contemporaneous belief was determinative, even if that belief contradicted the terms of the contract and was unreasonable.
After the government entered into a takeover agreement with a defaulted contractor’s performance surety, the contractor could not appeal government reprocurement expenditures even though the contractor might have been ultimately liable for indemnifying the surety for those expenditures. This is distinct from a situation in which there is no takeover agreement and the government seeks to recoup reprocurement costs directly from the contractor.
Volume: 16, Issue: 14 - 07/31/2018
Construction contract disputes are usually strictly business matters. What did the contract say? How did it allocate risk? How does it apply to the facts of this project? Sometimes, however, these disputes involve drama – claims of scheming, trickery and betrayal. This issue includes two cases of that nature. Read more.