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ConstructionPro Week, Volume: Construction Advisor Today - Issue: 80 - 11/05/2010

Treating Fixed-Price Subcontracts As Cost Reimbursement

A reader recently contacted me at the Advisor regarding a problem you might share. He is president of a specialty design/build subcontracting company. He signs fixed-price subcontracts containing a schedule of values. But on three recent projects the prime contractor, and even the project owner, have insisted on seeing documentation of actual costs before making payments. One owner’s rep suggested the specialty sub was making “too much money” on the job.

 

These requests are obviously inconsistent with a fixed-price agreement. The prime contractor is signing a fixed-price subcontract and then trying to renegotiate the price or convert the subcontract to cost reimbursement. And the project owner has no business interfering in the contractual relationship between the prime and the sub.

 

 

There are of course legal remedies for these malfeasances. But as the reader notes, the remedies are frequently expensive and impractical. And the project owner and prime contractor possess great leverage when it comes to the chain of payment.

 

Are you facing similar experiences? If so, what is your response?  I invite your comments below.

 

Featured in next week's Construction Claims Advisor . . .

  • Lender Had No Duty to Inform Contractors of Final Disbursement of Loan Proceeds
  • Joint Check Agreement Did Not Preclude Naming Additional Payees
  • Offeror Fails to Show Fifty Percent Completion of Recent Project

 

Bruce Jervis, Editor
Construction Claims Advisor

 

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