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Matt has written articles and given presentations on all aspects of construction law. Find a resource here.

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Best Practices top posts include claims preparation, contract drafting, and litigation pitfalls. You don’t want to miss these ones.

Matthew DeVries

Matt is a construction & litigation attorney at Burr & Forman LLP and father of seven young kids.

Revised AAA Construction Rules Take Effect July 1, 2015

Posted in Alternative Dispute Resolution, Arbitration, Legal Trends, Mediation

The past week has been one of sweeping changes. (…no comment…)  But one set of non-controversial changes is the Revised Construction Industry Arbitration and Mediation Procedures released by the American Arbitration Association.

change2

The Rules, which take effect July 1, 2015, can be downloaded here.  The major revisions include:

  • A mediation step for all cases with claims of $100,000 or more (subject to the ability of any party to opt out).  Under the revised Rule 10, “…the parties shall mediator their dispute” where the claim or counterclaim exceeds $100,000.  The mediation is to take place concurrent with the arbitration proceedings so as not to cause delay.
  • Consolidation and joinder time frames and filing requirements to streamline these increasingly involved issues in construction arbitrations.  Revised Rule 7 requires that all requests for consolidation or joinder must be made prior to the appointment of an arbitrator or within 90 days of the date AAA determines all administrative filings have occurred, whichever is later.  A response to a request for consolidation is due within 10 days and a response to a request for joinder is due within 14 days.  The AAA has the authority to stay the arbitration or arbitrations impacted by the request.
  • New preliminary hearing rules to provide more structure and organization to get the arbitration process on the right track from the beginning.  New Rule 23 provides that at the discretion of the arbitrator, and depending upon the size and complexity of the matter, a preliminary hearing is to be scheduled as soon as practicable following the appointment of the arbitrator.  The Rule also includes a checklist comprised of 20 items that depending upon the size, subject matter, and complexity of the dispute may be addressed during the preliminary hearing subject to the discretion of the arbitrator.
  • Information exchange measures to give arbitrators a greater degree of control to limit the exchange of information, including electronic documents.  New Rule 24 provides clarity to former rule regarding “Exchange of Information.”  The arbitrator has greater control over the exchange of information with a view toward achieving an economical resolution, while also balancing each party’s ability to present their case. As to electronic documents, the new rule provides that such information should be produced in the manner most convenient and economical for the producing party.
  • Availability of emergency measures of protection in contracts that have been entered into on or after July 1, 2015. New Rule 39 will enable parties to apply for emergency interim relief before an arbitrator that will be appointed within 24 hours of the AAA’s receipt of the request for emergency relief. The Rule provides that a party may seek emergency relief by notifying the AAA and the other parties to the arbitration, and then the AAA will quickly appoint an emergency arbitrator to address the emergency issue.
  • Enforcement power of the arbitrator to issue orders to parties that refuse to comply with the Rules or the arbitrator’s orders, including the following issues:  (a) confidential documents and information; (b) reasonable search parameters for electronic and other documents; (c) costs of producing documentation; (d) issues of willful non-compliance with any order; and (e) other types of enforcement orders.
  • Permissibility of dispositive motions to dispose of all or part of a claim. New Rule 34 This specifically provides that upon prior written application, the arbitrator may permit motions that dispose of all or a part of a claim, or narrow the issues in a case.

The revised rules also include provisions for giving arbitrators the power to award sanctions, disclosure provisions, and evidence by affidavits and post-hearing filings of documents.

Happy Birthday AAA Supplementary Construction Rules for Fixed Time and Cost

Posted in Alternative Dispute Resolution, Arbitration, Best Practices

Happy Birthday to You! Happy Birthday to You! Happy Birthday Dear AAA Supplementary Rules! Happy Birthday to you!

One year ago, the American Arbitration Association implemented new rules to provide an arbitration process that would be more predictable in terms of time and cost. The Supplementary Rules for Fixed Time and Cost Construction Arbitration (“Supplementary Rules”) were established to control:

  1. the maximum time to complete the arbitration;
  2. the number of hearing days the arbitration will run;
  3. the arbitrator costs; and
  4. the AAA administration fees.

How the Rules Work? Of course, being created by the AAA, the Supplementary Rules are intended to be administered by AAA arbitrators. According to the rules, the time to complete the arbitration, the number of hearing days, and AAA fees and arbitrator compensation, are calculated according to the applicable Time/Cost Schedules and are based on the larger of the claim or counterclaim. If you attempt to change the number of hearing days or time frame, the AAA may in its discretion apply the Regular Track or Large, Complex Case Track of the Construction Industry Arbitration Rules.

So What? After you review the Supplementary Rules, you can tell that they are most useful for those cases where there is a distinct issue in dispute and there is not going to be the need for significant discovery.  Here are some of the key components:

  • If the parties’ contract calls for application of the Supplementary Rules, then AAA will administer the case under those rules.
  • If parties agree to an existing dispute want to use the Supplementary Rules, they may commence an arbitration by filing a submission agreement to arbitrate under the Supplementary Rules.
  • A party files a demand for arbitration in accordance with their construction contract, but is limited to 5 pages.
  • The respondent has up to 14 days to answer, which also may not exceed 5 pages.
  • A party has up to 30 days from the filing of a counterclaim to amend its claim or counterclaim.
  • An administrative conference shall take place within three days of filing for arbitration, and within 14 days after the conference, the parties shall meet (either in person or by phone or video conference) and confer.
  • Only one arbitrator shall administer the proceedings. The parties must select the arbitrator, when the hearing will occur, maximum number of days for the hearing, and the extent of discovery.
  • The arbitrator is authorized to amend and approve the discovery plan for the parties. If the parties fail to agree on terms, the Supplementary Rules provide guidance.

Ultimately, the arbitrator must make an award to the parties not more than 20 days from the close of the hearings. The rules provide the form for the award, amount of arbitrator’s compensation, and administrative fees. Fees range from $10,500 to $52,000. The rules also provide for remedies for nonpayment and defaults.

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Questions: Have you used the Supplementary Rules in your construction contracts? Have you arbitrated a case using them?  I’d love to hear some feedback.

The Real Lemon in the Bunch: Understanding Pay-If-Paid Clauses

Posted in Best Practices, Legal Trends, Tennessee, VA, DC, MD

As you may be aware, one of the greatest risks on a construction project involves the payment process. Just like my kids expect to be paid for the lemonade they sell, contractors and subcontractors expect to be paid on a timely basis once the work has been performed.

2009-10-31 10.12.03

Contractors have a means of shifting the risk of non-payment by the owner to its subcontractor by including a certain payment provisions in the subcontract agreement.  The enforceability of these types of clauses may be limited by your particular state or jurisdiction.

In Universal Concrete Products Corp. v. Turner Construction Company (pdf), the U.S. Court of Appeals for the 4th Circuit concluded that a “pay if paid” clause in a subcontract was not ambiguous and, therefore, enforceable against the subcontractor.  The work involved the construction of the Granby Tower Project in Norfolk, Virginia. The subcontract between the general contractor and the concrete subcontractor contained the following clause:

“The obligation of contractor to make payment under this agreement, whether a progress or final payment, or for extra or change orders or delays to the work, is subject to the express condition precedent of payment from the owner.”

The owner ultimately lost its construction financing on the project and abandoned the development. Since the contractor had not been paid for its work, it refused to pay the subcontractor’s work.  In a payment dispute between the subcontractor and contractor, the contractor argued that the “pay if paid” clause provided an absolute defense to payment. (Again, it should be noted that some states limit the enforceability of these clauses by either statute or case law. However, in Virginia, these types of clauses are enforceable so long as they are clear and unambiguous.)

The subcontractor argued that the prime contract between the owner and the contractor defined the cost of work to include “payments made” to subcontractors. Accordingly, the subcontractor argued that the contractor would, under the normal scenario, be paying its subcontractors and submitting the invoice to the owner as a “payment made” by the contractor. Both the trial court and the Court of Appeals disagreed, finding that payment from the owner was a condition precedent to payment from the contractor to the subcontractor.

Courts across the country vary in their treatment of these issues. For example, in the Universal Concrete Products case, the 4th Circuit reasoned that Virginia courts favor the freedom to contract and that parties are freely able to negotiate and draft these types of provisions. However, in Thomas J. Dyer v. Bishop International Engineering, the 6th Circuit refused to enforce a “pay when paid” clause because the court determined that the clause was sufficiently ambiguous. In that case, the contract stated that “no part of payment shall be due until 5 days after the owner shall have paid the contractor.”  Other jurisdictions, such as California, New York and Nevada, have expressly ruled that the “pay as paid” clauses are unenforceable as a violation of state public policy.

So, what should your contracts provide?  What should you do to determine the enforceability of a “pay if paid” clause in your state?

  • Contact an attorney within your jurisdiction to determine whether there are any limitations of the enforcement of these type of clauses.  Since each state differs dramatically, it is in your best interest to determine the applicable standard in your state or the applicable law where the project is located or the governing law of the contract to determine this information.
  • Determine as between the parties who should bear the risk of non-payment. If you are a general contractor, you should make sure that your subcontracts include clear and unambiguous language placing the risk of loss for non-payment on the subcontractor. In addition to putting a timing mechanism on payment of funds to the subcontractor following a certain number of days after payment by the owner, it is also advisable to include a clause that “payment by the owner to the contractor is a condition precedent to payment by the contractor to the subcontractor”. In addition, you can make your subcontracts explicitly clear by stating that “the subcontractor assumes the risk of non-payment by the owner due to insolvency or other inability to pay”.

For the contractors out there, Universal Concrete Products is a good reminder of the importance of drafting clear and unambiguous contact terms between the parties.  It is worth the effort to seek legal advice on these issues prior to drafting and executing contracts with other parties.

For the legal practitioner, Universal Concrete Products again reminds us of the importance of legal research in our profession.  It is imperative that we, as a legal advisor, stay up to date on the case law within in our jurisdiction, as well as check other jurisdictions to help guide our clients through legal risks.

Discover an Underground Storage Tank During Construction? What Next?

Posted in Best Practices, Tennessee, Transportation

HQ Construction, the Tennessee Department of Transportations new monthly newsletter, recently highlighted in its June 2015 issue an instance when a road builder discovered what appeared to be an underground storage tank (UST).  That can certainly disrupt construction, right?

HQ Construction (June 2015)

HQ Construction (June 2015)

During excavation activities of the I-40 Fast Fix 8 project, Kiewit Construction unearthed what appeared to be a UST associated with a building that no long existed.  The UST had not been identified during the Phase I environmental assessment.  Unfortunately, during excavation a track hoe operator accidentally punctured the UST, causing 1,000 gallons of water to be released into the excavated area.  According to the HQ Construction newsletter, Kiewit worked with TDOT and the Tennessee Department of Environment and Conservation to safely mitigate the problem.

What should you do if a UST is discovered during construction?  While the lesson above demonstrates what appears to be a happy ending, contractors should be mindful of the risks associated with differing site conditions and environmental impacts related to USTs.  Here are a few tips should you find yourself in the situation as Kiewit did on the Fast Fix 8 project:

  1. Stop work immediately.   Many contract documents require the contractor to “immediately suspend” the operations upon the discovery of an environmental hazard.  Even if your contract does not address this situation, you should stop work to properly analyze the situation.
  2. Call others.  This includes the owner (whether public or private), the architect/engineer of record, an environmental consultant or attorney, and pertinent (if necessary) environmental officials.  Have an attorney check applicable laws regarding environmental reporting obligations to to see whether you have a duty to notify any other public authorities.
  3. Assess options.  Consider immediate response activities to mitigate releases of hazardous substances or petroleum products.  Depending on your jurisdiction, you may be required to develop a remedial plan, which would require the hiring of an environmental consultant or engineer.
  4. Preserve claims.  As always, the parties’ contract should address risks such as “environmental hazards” of “differing site conditions” on the construction site.  Generally, the owner of the site is required to take action to continue the work and resolve the problem.  The contractor may be entitled to additional time and money for the impact of the discovery and remediation efforts.

In the situation above, it appears that TDOT, TDEC and the contractor worked together to efficiently and safely remove the UST without significant impact to the work.  After the removal, the contractor was able to continue its work.

[Thanks to fellow partner and environmental attorney, Greg Young, for some added tips!]

“New” Means “New” When the Construction Contract Says “New”

Posted in Best Practices, Case Law, Federal Construction, Legal Trends

There’s “new.” And there’s “new to you.” And there’s “refurbished new.” And there’s “open box special new.” And there’s “floor display model new.”  But when it comes to contract specifications requiring “new” equipment, one court looked to a dictionary to define it as “never used before” and “free of significant damage.”

Dictionary

In a recent case, Reliable Contracting Group, LLC v. Department of Veterans Affairs, 779 F.3d 1329 (Fed. Cir. 2015), the Government entered an agreement with the Contractor to install three back-up generators.  The contract specifications required new equipment:

All equipment, material, and articles incorporated into the work covered by this contract shall be new and of the most suitable grade for the purpose intended, unless otherwise specifically provided in this contract.

A dispute arose over the nature of the equipment supplied because the contract did not define the word, “new.”  Furthermore, Federal Acquisition Regulation 52.211-5, which was incorporated into the contract, requires that supplies “new, reconditioned, or remanufactured,” and it defined “new” to include that the supplies be “composed of previously unused components.”

The generators that were delivered to the site by the Contractor’s supplier were in terrible condition, showing a lot of wear and tear.  Investigation revealed that the generators were manufactured in 2000, purchased by others, but never actually used before they were delivered to the Governments site in 2004.  The Government ultimately rejected the initial equipment, but later approved different generators that were installed.  The Contractor submitted a claim for $1.1 million for additional costs incurred as a result of the Government’s wrongful rejection of the initial generators.

One “New ” Definition. In support of its claim of wrongful rejection by the Government, the Contractor argued that that the original generators were “new” because they had never been used, even though they were previously owned and damaged by improper storage.

Another “New” Definition.   The Goverment argued that to be considered “new” the equipment must be “capable of being tested at the factory.” Because the generators left the factory in 2000, they were incapable of being factory tested in 2004 and therefore not “new.” This was an interesting argument because factory testing was optional in the contract and the Government never requested it.

Yet Another “New” Definition.  A divided panel of the U.S Court of Appeals for the Federal Tenth Circuit rejected both definitions of “new” and instead determined there was an ambiguity.  Accordingly, the Court looked to the dictionary definitions of “new” and to industry definitions, standards, and practices:

One possible meaning is . . . that “new” means not previously owned by another. . . .“New” could require that the generators be recently manufactured. . . .  “New” could require a fresh condition. . . . We think this definition is appropriate for purposes of § 1.47. There is no testimony as to how, in the industry, a generator can be “new” if it has been severely damaged. It defies logic to conclude that the parties intended to treat seriously damaged generators as “new.”

The Holding. The Court held that new does not require that the equipment be entirely free of cosmetic defects.  Rather, “new” requires that the generators must not be used and also must be free of significant damage, i.e., damage that is not cosmetic.  Based upon the definitions adopted by the Court, the case was remanded to the board to determine whether damage to the original generators was significant enough to render them “not new.”

So What? The Contractor in this case was in a difficult spot.  Where the original generators were in terrible condition by accounts of all observers, the Contractor ultimately forced its supplier to provide new ones and try to recover its losses at a later time.  The decision demonstrates how courts deal with contract ambiguities and often attach meanings to contract terms that may not have been anticipated by the parties.

Government Contractors: Threatening to File a Claim is Not the Same as Filing a Claim

Posted in Case Law, Claims and Disputes, Federal Construction, Legal Trends

Words matter. Grammar matters. Even punctuation matters:

Let’s eat, Grandma!

Let’s eat Grandma!

For one government contractor, its claim was recently rejected by the Civilian Board of Contract Appeals because the Board found that the Contractor did not properly state its claim.  In Construction Group LLC v. Dept. of Homeland Security, 15-1 BCA para. 35900 (Mar. 5, 2015), aff’d, CBCA 4459-R (Apr. 22, 2015), the Board dismissed the case for lack of jurisdiction because no underlying claim or contracting officer decision existed.

The Dispute.  The US Coast Guard awarded a $500,000 contract to Construction Group LLC to restore a pump station and perform certain electrical repairs.  Almost six months after completion of the project, the Contractor wrote a note to the contracting office, “advising [her] of [its] intent to submit a claim arising under and relating to the … contract.”  Two months later, the Contractor again told the contracting officer that “it is our intent to submit a claim” for certain re-work that had been performed. Almost a year after its first letter, the Contractor wrote that it was making a claim “to modify, reform and renegotiate the contract,” but it did not attach any claim to the letter.  More than two years after completion of the project, the contracting officer wrote a letter, closing out the contract.

The Result.  The Contractor filed an appeal from the contracting officer’s close-out letter.  The Department of Homeland Security objected to the appeal on the basis that the Board lacked jurisdiction since there was never any official claim submitted by the Contractor.  The Board rejected the appeal, noting the following:

Here, it is clear that neither the contractor nor the Government has made a claim. We understand that Construction Group is upset with the Coast Guard’s determination that all work done under the contract was satisfactory . . . . The contractor has on several occasions manifested an intent to make a claim or claims under the contract, but the record contains no evidence that any such claim was ever made.

So What?  As this case demonstrates, words do matter!  Under the controlling law, a claim is “a written demand or written assertion … seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or related to the contract.”  Stated differently, an “intent to file a claim” is not the same as “claim is hereby made” when you are communicating with the contracting officer.

Contractor Submits “Penny Bid” for Rock Removal and Loses in the End

Posted in Case Law, Contract Docs, Legal Trends

In our house of seven children, a penny found on the ground brings laughter and excitement. You can imagine the opposite reaction when a contractor bids a penny for rock removal for a competitive bid and later discovers that there was 250% more rock than anticipated.

Penny

That’s what happened recently in Celco Construction Corp. v. Town of Avon. In its successful bid to perform work for the Town of Avon, th Contractor assigned a unit price of $0.01 to excavate each cubic yard of rock from the site. Of course, that price was substantially lower than its actual cost to remove rock, but the Contractor based its bid on the assumption that the amount of rock actually on site would be considerably less than the unverified estimate indicated in the contract bid documents.  The Contractor believed its low unit price would give it a competitive advantage when compared to other bidders who bid more closely to the actual cost.

When the amount of rock turned out to exceed the estimate by more than 1,500 cubic yards, the Contractor sought an “equitable adjustment” in the contract price to recover its increased costs for rock removal. The Town rejected the Contractor’s request and the trial court found in favor of the Town.  The appellate court affirmed the trial court’s decision.

Quantity versus Quality.  The Contractor based its request for equitable adjustment based entirely upon the increased quantity, rather than the nature of the rock encountered. This was an important distinction for the court when reviewing the differing site conditions claim:

Celco submitted no evidence suggesting that the character of the rock discovered on site was different, or that the actual unit cost to remove it was greater, by reason of the increased amount or any other concealed condition.

To be clear, the Contractor sought additional compensation based solely on the “additional rock” and not due to some concealed condition.

The Court’s Reasoning.  Viewing the claim under Massachusetts’ differing site conditions clause, the court noted that the contract bid documents expressly denied the accuracy of the amount of rock to be encountered on the site.  The figure as “solely for the purpose of allowing comparison of the submitted bids.” In other words, teh amount of rock was “indeterminate.”  Since there was no proof that there was a material difference in the actual subsurface or latent physical conditions at the site to cause an increase in the cost of the work, the appellate court affirmed the trial court’s decision.

So What?  This case is a good example for contractors to review when evaluating their competitive bid processes.  While it may be a gamble to include a “penny bid” unit cost in your bid, make sure the risk of exposure does not outweigh the competitive bid advantage you seek.  Additionally, make sure to review your applicable “differing site conditions” clause in the contract documents before you submit your bid. In order to be considered a “changed condition,” most contracts require that the nature or character of the concealed subsurface condition must be “materially different” than the known condition. As noted by Celco, unit prices generally will not be altered based solely on increased quantities.

Change Directive v. Change Order v. Construction Change

Posted in Best Practices, Claims and Disputes, Tennessee

In the legal world, words have meaning.  Not to say that words have any less meaning in the non-legal world, but sometimes you can get tricked up in your correspondence, notice letters, claims or otherwise when you use the wrong work.  Take, for example, the world of changes in the construction context.

eraser

When you are dealing with changes on a project, they can be classified, treated, reviewed, and compensated on a different basis.  Perhaps the best description is included in Tennessee Department of Transportation’s new specifications (pdf) that were release earlier this year.  According to the new specifications, here are three different types of changes:

  • Change Directive: A Change Order issued by the Department, when the Contractor has filed a claim, that allows the Department to compensate the Contractor for completed additional work as determined to be fair and reasonable by the Department and that does not require the consent or signature of the Contractor or Surety.
  • Change Order: A written agreement entered into by and between the Department and the Contractor, with the written assent of the Surety, covering modifications or alterations beyond the scope of the original Contract, and establishing any necessary new Contract items, any other
    basis of payment, and any time adjustments for the work affected by the changes. This Agreement becomes a part of the Contract when properly executed and approved.
  • Construction Change: A completed document, approved by the Engineer, covering changes in the Plans, Specifications or quantities, and additional items and the basis of payment that have been established by a previously executed Change Order.

As a contractor, just because you experience a change of work on the project does not mean you will automatically be entitled to additional time or money.  You will need to review your contract to make sure you are allowed any recovery for a change in your work. And when you get to the point of filing a claim for the impact of a change, then make sure you use the right words.

Bidders: Pay Attention to Your Clocks, Fax Machines and Email Servers

Posted in Federal Construction, Technology

Yesterday was daylight savings day, which means that you are probably running about your job this morning a little more groggy because you lost an hour of sleep. As I was waffling through emails today in my own groggy state, I received an alert about a new area code being added to the Nashville, Tennessee area.  Naturally, I thought about bid day.

fax

What about bid day? Think about how technology has improved all aspects of the construction industry.  Think about how we deal with electronic drawings. Think about how we communicate between the project site and the home office.  And think about how we transmit proposals on bid day…by fax and email.

But technology does not solve all problems. Sometimes, problems with technology create their own problems.  For example, in Federal Acquisition Services Team, LLC (pdf), B-410466, December 31, 2014, the government contractor challenged an agency’s decision not to consider its proposal that was transmitted by email but had been rejected by the agency’s server. The contractor asserted that its proposal was improperly rejected and it was “bounced back” by the agency’s server for exceeding the applicable size limitation for emails. In the protester’s view, the problem occurred as the result of a “systemic failure” of the agency’s systems, and the agency therefore should consider the proposal.  The GAO denied the protest.

The GAO determined that the proposal was never “actually received” by the agency.  The fact that the proposal was rejected by the agency server was not important because other offerors received the same “bounce back” message and they modified their submissions and resent them.  Finally, there was not sufficient evidence to prove a “systemic failure” with the agency’s servers.

The takeaway.  The real lesson from the Federal Acquisition Services Team decision is to be mindful of potential problems with technology and to plan for those problems.  Here are a few tips:

  • Check your fax machine settings.  With the announcement of the new area code in Nashville, local contractors should make sure to re-program your fax machine numbers to include the full area code. You know have to dial the full ten numbers, whether (615) or (629).  Don’t wait until bid day to check your settings to make sure the fax machine works.
  • Review submission guidelines. When submitting large documents, make sure your proposal can be submitted within the data requirements.  Did you know that a document converted to PDF can be made smaller than a document scanned to PDF?  Make sure you have a back-up plan.
  • Don’t get caught by surprise.  While most of our network cell phones automatically update with the time change, make sure you change all of the phone in your business.  Even this morning, I walked around the office and every manually set phone was running an hour behind.

Let technology help your chances on bid day, not hurt them.

Photo: Abhisek Sarda / Creative Commons

Construction Contract Tip: Pay Attention to “Coordination and Cooperation ” Clauses

Posted in Contract Docs

Busy, busy, busy!  I have reviewed five new construction contracts in the past two weeks.  If you are a contractor, there are a number of key provisions that you will want to be on the “look out” before you sign the agreement. Check out my series on the Top 20 Contract Issues for Contractors and Subcontractors.

contract

Recently I have worked on a couple of matters for contractors who were expecting unlimited access to their construction site, only to find the owner had given the prime access point to an adjacent contractor. The owners defended their actions based on standard contract specifications requiring “coordination and cooperation” of the contractors.

What have the courts done in these situations? They look both at the contract language and at implied duties. It is settled law that every contract contains an implied obligation that neither party will do anything to prevent, hinder or delay performance. An owner, including a DOT, is said to have violated the implied obligations where its action or inaction delays performance of the project, thus increasing costs. Here are two few cases addressing the situation:

  • In Gerhardt F. Meyne v. U.S., 110 Ct.Cl. 527 (1948), the Court of Claims considered a specification which provided that site “entrance for trucks shall be at South gate of reservation, over Walker Avenue, Highwood, Illinois, via Patten Road to site.” The contract plainly contemplated the use of Patten Road and other paved roads. Shortly before the contractor began performance, military authorities closed the road and directed the contractor to enter the reservation over an unpaved road. The court found the site access specification was a representation that Patten Road would be available and that the contractor relied on this representation. If the roads were not available, the government impliedly promised it “would stand the increased costs.” On that basis the court found the contractor was entitled to recover its increased costs stemming from the use of a different site entry.
  • Re Commercial Contractors Equipment, Inc., 2003 WL 22232953 (A.S.B.C.A.) involved a contractor who could not access the construction site due to the government’s inability to secure property rights by the promised time. The subsequent delay affected construction sequencing and scheduling. Although the contractor was able to work on another phase after altering its construction sequencing, it spent additional time and effort moving its forces and equipment around the unsecured location. The contractor initially agreed to avoid the encumbered area; however, the Board found the contractor did not waive its right to seek additional compensation for the denied access. Additionally, the contractor informed the corps it could no longer avoid such work without incurring additional costs. The Board found the Army Corps’ failure to secure unencumbered access to the construction site was a breach of its express warranty and constituted a change to the contract, entitling the contractor to an equitable adjustment for additional costs incurred from the disruption of its work sequence and movement of its equipment and work forces.

Keep it positive.  What about clauses like the “coordination and cooperation” of contractors clause? If there is a specific representation in the contract regarding access, then those clauses should not prevent recovery. In an old Supreme Court case, Hollerbach v. United States, 233 U.S. 165, 34 S.Ct. 553 (1914), the court made it clear that a government contractor is entitled to rely upon positive statements made in the specifications despite general cautionary language in other paragraphs of the specifications. The court held that the positive statement in the specifications constituted a representation upon which the contractor had a right to rely. But in order for the government to be held liable for its statements they must be interpreted as an express warranty.