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.

Although a contractor’s claim against a project owner was for unjust enrichment, it was essentially a claim for money owed for public construction work. Timing of final payment was governed by a state statute. That timing determined commencement of a one-year claim limitation period.

When signing off on a change order, contractors may reserve the right to seek some additional increased costs that may be incurred as a result of the change. Sometimes referred to as “carve-outs,” these reservations are interpreted narrowly. The contractor only reserves the rights it expressly defined.

A contractor signed a bilateral contract modification that reserved the right to seek “any time extension due to the changed work, and resulting increased cost.” The contractor did not seek a time extension, instead electing to accelerate the pace of the work in order to avoid winter work conditions. The contractor could not recover the cost of acceleration.

The second case in this issue involves the mechanic’s lien rights of an unpaid architect. The architect did not have a contract with the property owner and did not provide any services on site. The architect had no recourse.

The third case addresses a situation in which the contract documents described subsurface conditions through test boring logs, but warned of “local variations.” This effectively placed the risk of certain undisclosed, latent conditions with the contractor.

Carve-out language in a waiver in a contract modification reserved a contractor’s right to the increased costs of a time extension. The contractor, however, did not request an extension and accelerated the work to mitigate winter work conditions. The reservation did not apply to the contractor’s acceleration costs.

An architect did not contract with the property owner for the preparation of plans. The work was never constructed, so neither the architect nor its staff participated in activities at the job site. Therefore, the architect was not entitled to mechanic’s lien protection to secure its payment.

A contract placed the risk of “local variations” in subsurface materials with the contractor. Expert opinion established that a site condition, while latent and undisclosed, should have been anticipated by the contractor.

Design specifications mandate the details of construction. The contractor is obligated to strictly conform to these directives. Consequently, the project owner extends an implied warranty to the contractor that a design specification is sufficient for the project and free from defects.

Performance specifications establish characteristics and capabilities required of the completed work. The contractor has the right and the obligation to devise the details that will meet these standards. At the same time, the owner’s implied warranty of the plans and specifications does not extend to performance specifications.

Challenges can arise because design documents are seldom labeled as design or performance. The U.S. Court of Appeals for the Federal Circuit was recently presented with a situation in which a set of contract drawings was labeled “conceptual” and “preliminary.” Yet a note on one of the drawings stipulated a precise thickness for a foundation slab. Did the government project owner warrant the sufficiency of that dimension?

The second case in this issue involves the right of a sole shareholder to represent a corporation in court. The non-attorney could represent a registered sole proprietorship but not the corporation, which was a distinct legal entity. The sole proprietorship, however, was not a party to the dispute.

On a design-build contract, a depiction in a conceptual drawing, combined with a drawing note, was more specific than a performance standard. This was a design specification and when it proved insufficient, the government was liable for breaching its implied warranty of the specification.

The sole shareholder and president of a corporation could not represent the corporation in court because the individual was not a licensed attorney and the corporation was a distinct legal entity. The individual could represent herself pro se, but there was no evidence her sole proprietorship had been a party to the matter in question.