Publicly procured construction contracts are subject to statutes and regulations governing permissible contractual arrangements. Private contracts are largely free from these constraints. Consequently, many of the innovations in construction contracting have come from the private sector. Fast-tracked design/build contracting – now widely authorized in the public sphere – is one example.
Sometimes, however, inexperienced private project owners engage in freewheeling contracting practices, which cause problems. A Tennessee developer awarded a fixed-price contract for construction of a commercial building, and then awarded a cost-plus contract to the same contractor for an expanded, but not clearly delineated, scope of work on the same ongoing project. Needless to say, a payment dispute resulted. The courts were left to allocate costs between those absorbed by the fixed-price contract and those that could be marked up and billed directly under the cost-plus contract.
The other case in this issue involved a government contracting officer’s statement in a “show cause” notice to a contractor. The acknowledgement of a situation as “differing site conditions” was not binding on the government in a subsequent judicial proceeding. The Court of Federal Claims, reviewing the matter “de novo,” was free to conclude the contractor did not encounter differing site conditions.