01/31/2018

Editor’s Notes

"Changed work" on a fixed-price contract can go both ways. If the project owner increases the scope of work, the contractor may be entitled to an equitable price increase. If the project owner decreases the scope of work, the owner may be entitled to a credit, a price decrease. So, what happens if the contractor devises a less expensive method for performing the work? Is the owner automatically entitled to a price credit?


In a recent case, the contract specified site access by the construction, use, and removal of temporary bridges. The contractor felt it would be cheaper and easier to access the site by land by purchasing a temporary easement from a utility company. The owner was aware of the contractor's plan and observed the contractor performing the work accordingly. The owner said nothing. When the work was complete, the owner took a credit reflecting the contractor's reduced cost of performance.


The project owner was denied the credit. The owner could have formally changed the contract or expressly authorized the change contingent on a credit. However, the owner could not silently acquiesce and then reduce the fixed contract price.


The other case in this issue involved an indemnification clause in a subcontract. The clause was void and unenforceable. It violated public policy and state statute because it purported to indemnify the prime contractor against its own negligence. 

 

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