When a project owner issues a deductive change order reducing the scope of the project work, the owner is entitled to a credit against the fixed contract price. The deduction should reflect the cost of performing the deleted work. What if the deductive change order results from the owner’s own error in its specifications? And, what if the contractor tries to read the defective spec out of the contract, arguing it had no impact on the bid price?

The Federal Circuit of the U.S. Court of Appeals recently addressed this situation. While the parties had argued vigorously over whether the error was latent or patent—affecting the contractor’s duty to seek pre-bid clarification—the contractor’s own documentation indicated it was aware of the error prior to bid submittal. The government was entitled to the deductive credit.

The second case in this issue involves the calculation of an architect’s design fee that was based on a percentage of total construction cost. When the construction has not been completed, can the total cost be extrapolated from the actual cost of partially completed work? If estimated costs are based on bid prices, must the architect’s fee be derived from the low bid?

The third case applied a no-damages-for-delay clause to the statutory definition of money “due and owed” under a public works construction contract. The trial court had jurisdiction to consider the contractor’s claim for delay damages.

Contract documents called for improvements to a non-existing chilled water system. The contractor acknowledged it was aware of the error when it bid the contract but had taken it into consideration when pricing the work. Nonetheless, the government could take a credit when it deleted the improvements from the contract requirements.

A Massachusetts appeals court has addressed an architect’s fee stated as a percentage of the cost of the construction. When construction was not completed, the actual cost of the work performed was not relevant. Bid prices could be used to determine estimated cost, but the lowest bid was not necessarily determinative.

A no-damages-for-delay clause raised questions as to whether delay damages were “due and owed” under the construction contract. However, this did not deprive a trial court of jurisdiction under a state Contract Claims Act.

Most states have statutory schemes to protect the payment rights of contractors and subcontractors on public works projects. Unable to file mechanic’s liens, they are allowed to assert claims against undisbursed project funds held by the public project owner. They are required to submit the amount owed via a certified or verified statement.

This gives rise to a question: must the amount due consist entirely of unpaid invoices for labor and materials furnished to the project? Or, may it include delay damage claims that are disputed and not quantified under the terms of the contract?

The Colorado Supreme Court recently addressed this question. The court ruled that a verified statement of claim could include delay damages to the extent the damages comprised increased labor, materials and equipment costs caused by delay. However, the statement of claim could not include “purely consequential” damages of delay such as lost profit or idle time. Those damages did not represent value added to the public project.

The second case in this issue involves stipulated cost allowances in a cost-plus contract with a guaranteed maximum price. Although an arbitrator appeared confused regarding the application of the allowances to the maximum price, this did not amount to arbitrator misconduct. A California court was bound to let the arbitration award stand.

A contractor may include construction-related delay damages in a statement of claim under the state Public Works Act.

Although an arbitrator may have misunderstood the allowance provisions of a cost-plus contract and the impact on the guaranteed maximum price, a court will not review factual or legal errors of that arbitrator. Such errors do not constitute wrongdoing.

Public project owners have the authority—and the obligation—to define the project they want constructed. Construction companies bidding on these contracts are dependent on the documentation provided by the owners. A great deal of capital is at stake. It was therefore disappointing when a Minnesota appeals court read a geotechnical report out of the contract, essentially absolving the project owner of responsibility for the information it had provided.

The contract itself listed the “Contract Documents,” including the bid packet. Attached to the bid packet was a 283-page geotechnical report. However, the construction contract did not expressly identify the attachments to the stipulated documents as “Contract Documents.” As a result, the court said the project owner was not bound by the report. The contractor, having experienced a costly differing site condition, was left with no recourse.

The second case in this issue involves a recently completed apartment complex with water intrusion problems. Engineering reports placed some of the responsibility with the structural engineer, a subcontractor to the design architect. The engineer, however, argued it had no contract with the property owner. A Georgia appellate court said the engineer had extra-contractual duties that extended to third parties. Responsibility was not limited to contractual obligations to the architect.

The third case addresses the scope of a bilateral contract modification. While the change order granted additional time for the performance of extra work, it did not waive the contractor’s right to an extension for the government’s administrative delay in issuing the modification.

A geotechnical report attached to a bid packet did not, under the contract’s definition of contract documents, become part of the contract. The contractor had not been entitled to rely on the report and could not prevail with a differing site condition claim.

A contract modification for extra work provided additional time for performance but did not apply to government administrative delay. The contractor could pursue a claim for that delay, despite the absence of a reservation of right in the modification.