It is not unusual for a construction project owner to furnish equipment or other goods to the project. This is not just with “labor only” construction contracts, but also with traditional design-bid-construct contracts. It is sometimes in the owner’s financial self interest to provide goods it already owns or can procure more cost effectively. What happens, however, when the owner uses its goods to gain leverage over the contractor? In the case of federal construction contracts, the contractor has limited recourse.
A contractor submitted a fixed-price bid on a contract where the federal agency listed the government-furnished property it would provide. After contract award, the agency said it would not furnish some of that equipment unless the contractor agreed to a deductive credit to the contract price. The contractor refused and purchased the equipment on the commercial market. When the contractor sought compensation from the government, it discovered that the standard federal contract clause “Government-Furnished Property” limited its remedies.
The other case in this issue involves the bonding off of mechanic’s liens. The Massachusetts Supreme Court distinguished bonds that prospectively protect a project from potential liens from bonds that dissolve liens that have already been perfected.
