By Bruce Jervis
Prime contractors, when attempting to resolve payment and scope of work disputes with subcontractors, frequently advocate on behalf of a sub against the project owner. The hope is that the project owner will authorize additional funds which can be used to compensate the subcontractor. This advocacy, however, has its pitfalls.
In advocating to the owner on behalf of a subcontractor, the contractor may take positions which are contrary to the contractor’s interest vis-à-vis the sub. It is difficult to be the advocate for a party which may become one’s adversary. An example is found in a recent federal court case from Alabama.
The prime contractor sent a letter to the project owner stating that the contract documents called for 32-inch step width escalators and the equipment installed by the contractor’s sub complied with the contract requirements. Under pressure from the owner, the contractor later reversed course, agreeing that the contract required 40-inch escalators and insisting the subcontractor absorb the cost of replacing the equipment.
When sued by the subcontractor for the replacement cost, the contractor attempted to keep the letter to the owner out of evidence, contending it had merely expressed a position as an advocate. The court admitted the letter, however, as evidence of the prime contractor’s interpretation of the subcontract scope of work. The subcontractor successfully recovered from the prime contractor.
What is your opinion on this? Is it possible for a contractor to advocate on behalf of a subcontractor without compromising the contractor’s ultimate position? Subcontractors are not supposed to communicate directly with project owners, so is there really any alternative for contractors? I welcome your comments.