Volume: 22, Issue: 5 - 03/15/2024
“Substantial completion” is a significant project milestone that carries both legal and financial ramifications. Broadly defined as the point at which the project is fit for occupancy or its intended use by the owner, it is a factual determination that must be made in the field. Many contracts designate the project architect or project engineer as the final arbiter of substantial completion, but is certification of final completion really final and binding? Not necessarily.
A California court recently said the term, as used in a statute of limitation, established a statutory standard, not a contractual standard. The AIA contract documents designated the project architect as the certifier. Certificates could be considered as evidence of when substantial completion occurred, but only a judicial finder of fact could make the ultimate determination.
The second case in this issue involved a construction manager’s insurance coverage whose commercial general liability policy excluded coverage for “professional services.” While the CM’s responsibilities arguably involved a mix of professional and non-professional functions, a federal appeals court ruled that the insurer could deny coverage altogether for claims arising out of the CM’s performance.
The third case addressed a municipality’s withholding of public records—settlement agreements with polluters—pending conclusion of the bidding process for a water treatment facility. The Alabama Supreme Court ruled that concern about bid inflation justified the temporary withholding.
While an AIA construction contract form made the project architect the final arbiter of substantial completion, that certification could not alter the terms of a statute of limitation. The certification was merely evidence to be considered in applying the statute.
A construction manager’s commercial general liability insurance policy excluded professional services. Although some of the CM’s alleged shortcomings involved activities that might not be considered professional, the activities were interrelated with expressly excluded professional activities. The exclusion applied and the insurer had no duty to defend.
A city’s temporary nondisclosure of public records in the form of settlement agreements was justified. Disclosure of the funds available for construction of a facility would have encouraged inflated bidding. Temporary nondisclosure was in the best financial interest of the public.
Volume: 22, Issue: 4 - 02/29/2024
The United States government is the largest consumer of construction services in the world. As such, federal construction contract documents have served as a prototype for public works contracts in states and municipalities throughout the country. Federal construction projects have also generated a comprehensive body of legal precedent, with decisions from the federal administrative boards, the U.S. Court of Federal Claims and the U.S. Court of Appeals for the Federal Circuit. Both cases in this issue are from the federal administrative boards.
Test boring logs are an indication of subsurface conditions at a project site. But how much information can a contractor reasonably deduce or extrapolate from those logs? A set of contract documents included 10 boring logs, but none of the tests were performed in the site’s southwest quadrant. The contractor encountered subsurface problems, not indicated in the logs, in the southwest quadrant of the site. Did it constitute a Type I differing site condition?
Proprietary or sole source equipment specifications are prohibited under federal procurement law. Specifications for a pneumatic tube system were arguably sole source, but the contractor did not protest the terms of the contract prior to bid submittal. Having signed the contract, was the contractor bound by its terms despite the seemingly improper specifications?
It was not reasonable for a contractor to apply test boring log information from one area of a project to a separate area where no test borings had been performed. There had been no material misrepresentation of site conditions in the contract documents.
The Civilian Board of Contract Appeals has ruled that although an equipment specification may have been a de facto sole source requirement, the contractor—having failed to protest the terms of the solicitation prior to bidding—was bound by the terms of the contract.
Volume: 22, Issue: 3 - 02/15/2024
Most individuals involved in the construction process recognize the importance of signing documents only in their capacity as authorized agent of the entity they represent. The responsibilities and liabilities are not being assumed by the individual, but by the corporation, LLC, limited partnership, public agency, etc. A recent case from Tennessee provides an instructive scenario where an individual signed a construction contract only once, clearly in his capacity as an authorized representative of the construction corporation, and still found himself with personal liability exposure.
The AIA contract form included a box where the “Contractor” was named. Someone entered the name of the corporation and the name of the individual. The appellate court reasoned that as a named party to the contract, the individual could have become bound despite the lack of any signature in his individual capacity. The court additionally noted parties can indicate assent through their actions, inactions or spoken words.
The second case in this issue involves a contractor’s $369,990 bid preparation error when transposing a subcontractor price quotation. The contractor demanded a price reformation of the contract. The federal agency should have recognized that a clerical mistake had occurred, yet the project owner never sought verification of bid accuracy prior to contract award. Unfortunately for the contractor, the agency never had access to the bid preparation worksheets, which would have alerted it to the error.
The third case addresses the limitations of enforceability of broad “flow-down” clauses in subcontracts. When the sub agreed to assume toward the contractor all the obligations the contractor had assumed toward the project owner, did the subcontractor simply agree to construct its work in accordance with the technical specifications? Or, did the sub agree to all the general conditions incorporated into the prime contract?
Although an individual signed a construction contract only in his capacity as authorized representative of a corporation, that individual was identified as a “Contractor” in the agreement. The individual could become bound to the contract even in the absence of an individual signature.
A contractor’s bid error in transposing a subcontractor price did not entitle the contractor to a reformation of the contract price. The government had no constructive knowledge of the mistake and was not required to seek verification of the accuracy of the bid.