When two companies form a joint venture (JV) for the purpose of performing a construction contract, they share a basic goal—successful completion of the project on a profitable basis. When the JV makes money, both parties prosper. However, a recent case before the U.S. Court of Appeals for the Federal Circuit shows the disastrous results when the JV relationship becomes adversarial.

One JV party accused the other of unilaterally grabbing control of the JV, including its bank account. The aggrieved JV party refused to sign payment invoices, the government refused to issue payments and when the other JV party attempted to appeal the nonpayment, it had no recourse.

The second case in this issue addresses the use of a non-architect’s expert testimony to establish an architect’s professional standard of care. Illinois law does not require testimony from a licensed architect; however, the expert testimony in question did not attempt to establish standard of care, focusing instead on communication and procedure.

The third case involves a contractor’s response to a government “show cause” notice threatening default termination. The government had been concerned the contractor could not complete the work in a timely fashion. The contractor sought to reassure the government by submitting a performance schedule with a completion date after the contract deadline. This did not have the intended result.

One joint venture party cannot certify and submit a claim on behalf of the JV over the objection of the second joint venture party. A claim for unpaid invoices was properly dismissed.

The testimony of a non-architect expert witness was admissible against an architect, but the expert criticized the architect’s performance under an owner-architect agreement without establishing the architect’s professional standard of care.

A tardy contractor, faced with a government “show cause” notice threatening termination for default, responded with a completion schedule showing completion 114 days after the contract deadline. The contractor could not establish excusable delay, and its response to the notice was a repudiation of the contract, justifying termination for default.

One tends to think of “government” in a monolithic sense, but it comprises multiple agencies … at the federal, state and local levels. Each agency awards construction contracts in its individual capacity, which leads to a question: Can one agency’s management of a construction contract cause compensable delay to another agency’s physically interrelated construction contract?

A Texas court was presented with a situation in which a state DOT project was adjacent to, and physically interrelated with, a county highway construction project. The contractor on the county job alleged it had been delayed and disrupted by activities on the state project. Was this “owner-caused” delay?

The other case in this issue involved a state procurement statute that limited bid protest rights to issues where at least 10% of the estimated contract value was called into question. Was this a matter of standing to sue, which is discretionary and can be waived? Or, was the dollar threshold an ironclad jurisdictional requirement?

Delay and disruption to a county highway project was caused by construction activities at an adjacent state DOT highway project. Though the projects were physically interrelated, the contracts were awarded and administered by separate public entities. This was not “owner-caused delay.”

A statutory requirement that a bid protest challenges a matter involving at least 10% of the estimated contract value was jurisdictional and could not be waived. A disappointed bidder that did not meet that threshold simply had no protest rights.

What is the “reasonable value” of construction work? As the term suggests, this is usually not a simple numeric determination. Two cases in this issue illustrate what “value” is not.

In one case, a lower-tier subcontractor brought a claim against the prime contractor for its fair share of a settlement with the project owner. The sub argued the amount it assigned to its extra work, which was passed up to the prime and incorporated into the consolidated claim against the owner, should be determinative.

The other case involved the pricing of a project owner’s unilateral deductive change order. The contractor contended a schedule of values used for progress-payment purposes should govern. Unfortunately for the contractor, the contract expressly prohibited such use.

The third case in this issue applies the widely used AIA performance bond document to a late completion claim. The project owner argued that recovery against the bond for the contractor’s slow performance did not require the procedural steps of a formal default termination.

A lower-tier subcontractor’s quantum meruit claim against the prime contractor for a larger share of the settlement recovered from the project owner was not supported. Figures used in negotiating the settlement of the claim against the owner were not evidence of the reasonable value of the sub’s work.

A schedule of values, based upon prospective estimates of costs, was to be used solely for progress-payment purposes. It could not be used to price a deductive change order to a fixed-price contract.