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Volume: 18, Issue: 19 - 10/15/2020

 

This past May we looked at impacts and increased costs on construction projects due to COVID-19, including the results of research performed by Compass International's John McConville.  In this issue, we follow up with additional reporting by McConville as well as resources from the Sheet Metal Contractor's association (SMACNA).

 

This Week's Cases

Construction contracts commonly establish procedures for obtaining written change orders, as well as reserving claim rights when applying for progress payments. These formalities, however, may clash with the chaotic realities in the field. Then, the enforceability of the formalities is called into question.  This issue's first case deals with these issues.  The other two cases this issue deal with a denied differing site conditions claim despite an affirmative misrepresentation of the condition of the site in the contract documents.  The third case deals with the suspension of a statutory claim limitation period. Read more.


 

Last Spring, Construction Claims Advisor reported several articles on the impacts and additional costs on construction projects resulting from the COVID-19 pandemic.  This issue contains an update on some of these impacts, as well as two important resources that contractors should find useful. Read more.


 

When submitting applications for progress payments, a subcontractor failed to reserve the right to additional payment for field-directed work; however, the waiver and release language in the applications was not enforced due to the heavy volume of field directives.


 

A site inspection clause placed the risk of certain conditions squarely with the subcontractor. A misrepresentation of those conditions in the subcontract did not shift the risk to the prime contractor.


 

A statutory 12-month limitation period for filing suit against the state did not start to run upon issuance of a final administrative review decision on the claim. The contractor had the unilateral right to demand nonbinding mediation. When the contractor did so, the limitation period was tolled until conclusion of the mediation. 


Volume: 18, Issue: 18 - 09/30/2020

 

One of the primary functions of a Changes clause in a construction contract is to enable the project owner to clarify, correct or alter the design documents. Yet furnishing incomplete or inaccurate drawings and specifications is considered a breach of contract by the owner. This leads to an interesting question: Does the owner’s prior breach waive or relinquish the owner’s contractual right to require signed, written change orders? This issue's first case encounters this issue.

 

The other case in this issue involves responsibility for environmental mitigation costs. When the government represented that it had fully complied with one federal statute, but was silent on a second statute, the contractor was not expected to anticipate wetland mitigation fees arising out of the second statute.  Read more.


 

A municipal project owner could not enforce the change order provision of the contract against the contractor. The owner had furnished deficient drawings and specifications. This was a prior breach of contract, which relinquished the right to enforce the requirement for written, executed change orders.


 

A contract specification stated no further analysis of environmental impacts in government-designated waste disposal sites was necessary. The specification did not limit this statement to analysis under one federal statute but not another. Government insistence on additional analysis and wetland mitigation fees was a constructive change in the contract. 


Volume: 18, Issue: 17 - 09/16/2020

 

This issue could be subtitled “Bonding Companies Behaving Badly.” Two cases involved sureties engaged in sharp, heavy-handed tactics. One got its way. The other didn’t. In this week’s first case, a surety informed the project owner that its indemnification agreement with the bonded contractor gave the surety the right to the contractor’s contract payments. The surety instructed the owner to direct all payments to the surety, even though the owner had not terminated the contractor for default and considered the contractor entitled to an outstanding progress payment and, eventually, the contract retainage. The surety got its way. The General Indemnity Agreement assigned all the contractor’s payment rights to the surety, even in the absence of default, and this was enforceable against the contractor. The third case this month is a no-damage-for-delay clause unenforceable on a Pennsylvania project.  Read more.  


 

Under the terms of a General Indemnity Agreement imposed on a contractor by its bonding company, the surety could usurp the contractor’s progress payment, retainage and any other contract payment even in the absence of a declaration of default by the federal project owner. The government had discretion to waive the application of the federal Anti-Assignment Acts.


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