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.

A property owner could sue a structural engineer that had been a subcontractor to the design architect despite the lack of any contractual relationship between the owner and the engineer.

Corporate sureties will not issue payment and performance bonds without collateral … and indemnification. In the event of a loss on the bond, the surety wants recourse. Very large, deeply capitalized construction companies may be able to meet these requirements within the business entity itself. The majority of construction companies cannot. The individual owners of the company must co-sign the industry standard General Agreement of Indemnification (GAI) and often pledge their personal assets.

A surety sued its principal/contractor on a bond loss. The performance surety had settled a bond claim by the project owner without the participation or consent of the contractor and without any judicial determination of contractor liability. The individual shareholders and their spouses, co-signers of the GAI, cried foul. However, a federal appeals court was unsympathetic, as the plain language of the GAI gave the surety these rights.

The second case in this issue involves a claim for changed work. The contractor had added a claim item for differing site conditions. The site condition claim was not viable—the contract provisions in question related to the manner in which the work was to be performed, not the physical conditions at the worksite.

Under a standard General Agreement of Indemnification, a performance surety had exclusive discretion to settle project-owner claims against the performance bond. The contractor’s lack of participation in the process and lack of consent to the settlement were not evidence of bad faith on the part of the surety.

A contract did not misrepresent physical conditions at the worksite. Contractor allegations indicated, however, that the government directed performance of the work in a manner which differed from the contract requirements.

The distinction between a subcontractor and a supplier of materials or equipment is sometimes blurred. Subcontractors perform construction work at the site. Suppliers have a more limited role at the site, typically delivering their product and sometimes installing it. The difference is more than semantic—it can affect rights to mechanic’s liens and payment bond coverage. It can also have an impact on licensing requirements.

A California company designed and furnished custom wine cellars. The general contractor discovered the company did not have a contractor license and attempted to use the unlicensed status to recoup payments it had made. The wine cellar company said it had merely installed the equipment it had delivered; however, a court ruled this was no “plug-and-play” situation.

The second case in this issue involves the authority of a project architect to block final payment after substantial completion and use and occupancy by the public project owner. The construction contract made architect approval a precondition to the final payment release, so the matter came down to the scope of the architect’s discretion.

The third case addresses a bid protest about a municipal project owner that mishandled procurement in a number of ways but showed no indication of favoritism or malintent. A Connecticut court expressed reluctance to impose its judgment and supersede the contract award decision of the municipality.

A subcontract called for improvements permanently affixed to a structure. This was not merely an equipment delivery—a contractor license had been required. The prime contractor did not lose its rights under the licensing statute when it terminated the subcontract for its own convenience.

The approval of a final payment application by the project architect was, under the terms of the contract, a prerequisite to release of final payment. The contractor could not use the state prompt payment statute to mandate release of payment, even though the project was certified substantially complete and was in use by the public.