ConstructionAdvisorToday

Are No-Damage-for-Delay Clauses Fair?

No-damage-for-delay clauses can produce harsh results. Under the plain language of these contract provisions, the contractor waives the right to recover any damages of any kind incurred as a result of any delay or disruption of any nature, regardless of cause or fault. The contractor’s only remedy is an extension of the performance period.

Do Public Owners Use Bidder Experience Requirements to Manipulate the Bidding System?

During the competitive bidding process, it is customary for the public project owner to determine whether the low bidder is “responsible.” This entails an evaluation of the bidder’s resources and experience. The responsibility determination is controversial because it occurs after bids have been opened and prices exposed. It also involves some subjective or arbitrary evaluation criteria. No evaluation factor is more prone to abuse than bidder experience.

Is 'Total Cost' Pricing of Lost Labor Productivity Fair?

No claim is more difficult to quantify than one for lost labor productivity caused by delay and disruption. Delay may force work to be performed under more difficult conditions. It may be inclement weather. It may be a jobsite congested with multiple trades. Delay may also cause work to be performed in a start-and-stop fashion or out of sequence.

Should Lack of a License Always Be Grounds for No Payment?

State licensing of construction contractors is prevalent. The purpose is to regulate the industry for the protection of the public, including homeowners, commercial project owners, and even public project owners. A contractor must have the appropriate license prior to entering into and performing a construction contract.

Should Design Professionals Be Liable When Construction Cost Exceeds Budget?

Project owners must work within a budget based on available funding. The project design must accommodate that budget. Yet construction cost cannot be determined until binding responsive bids are received from responsible bidders. And those bid prices are the product of ever-changing market conditions. When the low bid exceeds the available funding, what is the responsibility of the design professional?

Pricing Changed Work: When and How?

Alteration of the contractual scope of work can result from a variety of factors. Unanticipated physical conditions at the site may necessitate changes. The original design may include shortcomings or oversights. The project owner may simply decide to expand or otherwise alter the definition of the work.

Pay-If-Paid Clauses in Subcontracts

Pay-if-paid clauses in subcontracts are controversial. The clauses purport to shift the risk of owner nonpayment from the prime contractor to the sub. The prime is obligated to pay the subcontractor only if the prime receives payment from the project owner for the sub’s work. The subcontractor, who contracted only with the prime, is at the mercy of the owner’s solvency and creditworthiness.

Must Contractors Warn Owners of Design Shortcomings?

A project owner is in the best position to gain familiarity with the physical conditions at the project site. The owner has ample opportunity to investigate those conditions, including expert evaluation. The owner then hires professionals to prepare design documents which reflect and accommodate those conditions.

Do Owners Abuse the Convenience Termination Clause?

The right to terminate a contract for the convenience of the project owner is a powerful one. These clauses originated in public construction contracts but are now found in many private contracts as well. The owner can terminate a contract without cause. No justification is necessary. It is for the owner’s convenience. The owner pays for the direct and indirect costs of work performed prior to the date of termination, plus profit on those costs plus reasonable termination expenses. But the owner incurs no liability for what would otherwise be damages for wrongful termination or breach of contract.

Should Construction Lenders Communicate with Constructors?

Construction contractors necessarily rely on the creditworthiness of project owners. Construction requires considerable capital. A contractor needs to know the owner will be able to make progress payments. On private projects, much of the construction capital is borrowed. This raises a question: Does a construction lender have an obligation to keep a contractor informed of the project owner’s financial condition?