Most public works contracts at the federal, state and local levels are subject to prevailing wage rate laws. Contractors bidding on these contracts have a fairly good idea what the labor costs will be if awarded the contract, and they know that failure to pay the mandatory minimum wages will subject them to substantial penalties. Are these bidders required to carry, in their bids, labor costs that comply with prevailing wage rate laws?
A New Jersey appellate court recently addressed this issue. The bid solicitation required the successful bidder to comply with wage rate determinations, but the solicitation was silent on how the labor component of the work should be priced in the bid. The apparent low bidder priced certain labor well below the prevailing rate. Was the bid nonresponsive to the terms of the solicitation? Was the bid unreasonably unbalanced?
The second case in this issue involved a project owner’s rights when a contractor allegedly substituted materials without authorization. The AIA contract documents prohibited such substitution. Was the owner’s sole recourse a suit under the contract or was there recourse in a tort suit for willful and wanton misconduct?
The third case concerned a contract to design, build and lease a building. Government mismanagement delayed issuance of a notice to proceed with construction. Lease payments would commence only when the government tenant took occupancy of the building. Could the contractor recover fixed costs incurred during the extended preoccupancy period or would such recovery constitute impermissible lost rent?