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.
