Liquidated damages are intended to compensate a project owner for a contractor’s late completion of the work. What happens, however, when the contractor’s delay is concurrent with owner-caused delay? Traditionally, the owner’s contribution to late completion bars any recovery of liquidated damages. This rule has resulted in part from judicial antipathy toward liquidated damages, an attitude that has dissipated over the decades. Today, apportionment of responsibility is the prevailing approach.

A California appeals court was presented with a situation in which a trial court denied a project owner any liquidated damages, suggesting recovery was barred by the owner’s concurrent delay. The appellate court said apportionment of responsibility would have been more appropriate, but the owner had the burden of proving entitlement to liquidated damages. And, the owner had presented no scheduling evidence that would have made apportionment possible.

The second case in this issue involves responsibility for interior tenant improvements in a new commercial building. Those improvements were excluded from the contractor’s scope of work. However, the contract’s Changes clause was triggered when the owner directed the contractor to perform the improvements. This obligated the contractor to follow the procedures stipulated in the clause.

The third case addresses a Montana statute establishing an alternative dispute resolution procedure encouraging pre-litigation settlement of residential construction disputes. The state Supreme Court ruled the statute did not create a new legal cause of action for “construction defects.”

The factual record did not establish or allow an apportionment of responsibility for critical path delay. Consequently, the project owner was denied recovery of liquidated damages. The contractor had been responsible for some delay, but that delay had been concurrent with owner-caused delay.

While interior tenant improvements were not included in an original contract, the owner’s insistence the contractor perform the improvements within the guaranteed maximum price was a directed change. The contractor had been obligated to comply with the procedural provisions of the Changes clause.

A state statute creating an alternative dispute resolution procedure for residential construction disputes was designed to encourage pre-litigation settlement and reduce the amount of litigation. The statute did not create a new legal cause of action to be litigated.

Design-build contracting has been common for decades. When statutes or rules based on traditional construct-only procurements interface with design-build practices, challenges arise. Two cases in this issue are illustrative.

A California appellate court addressed a novel issue: does the statute conferring rights on listed subcontractors on fixed-price public works contracts grant a remedy to a would-be subcontractor on a public works design-build project? The sub was denied a remedy, but only because the prospective subcontract was too small to qualify under the Subcontracting Practices Act.

A Colorado appeals court considered an incorporation by reference of a geotechnical report into a design-build subcontract. Was a recommendation in the report superseded by the scope of the request for a price quotation and the back-and-forth shop drawing procedures that determined the final design?

The third case in this issue involved an unobservable site condition. A note in the contract conveyed inaccurate information, but another contract provision contradicted that note. And, the contractor had previously performed work on the same structure. Should the contractor have anticipated the site condition notwithstanding the misrepresentation?

A state procurement statute for design-build contracts incorporated the Subcontracting Practices Act. The interplay between the two statutes was a matter of first impression.

A geotechnical report incorporated by reference into a design-build subcontract recommended an element of work not included in the completed project. A jury could find, however, that the recommendation was superseded by the solicitation for the subcontracted work and the shop drawing review and approval process.

A “general note” in a contract constituted an affirmative representation of a site condition; however, that representation proved to be inaccurate. Nonetheless, in light of the complete circumstances of the project, the actual site condition was reasonably foreseeable.

A contract clause establishing “disincentive deductions” was described as unusual. The clause authorized the government to withhold $2,700 per calendar day if the contractor failed to meet an interim milestone in the contractual construction schedule.

The defaulted contractor argued that the clause did not allow the government to withhold both the disincentive deductions and liquidated damages for late completion of the overall project. The Civilian Board of Contract Appeals disagreed.

The other case in this issue involved the commencement date of a claim limitation period. The date was established not by the contractor’s demand letters or change order proposals, but by a state statute defining when a public project owner must make final payment.  

A construction contract called for “disincentive deductions” for failure to meet an interim scheduling milestone and liquidated damages for failure to meet the overall contract completion deadline. The clause was interpreted to allow government recovery of both types of damages.