Contract retainage is intended to protect a project owner against deficient work, incomplete work and other forms of contract nonperformance. The 5–10% retained from each progress payment can add up to a significant sum over the course of the project. When project completion nears, the right to that retainage may become the source of disagreement.

The parties to a site improvement contract contested the contractor’s right to interest on unreleased retainage. The AIA contract form clearly called for interest on late progress payments, but was silent regarding interest on retained funds. A Pennsylvania court sidestepped a ruling on this issue, however, because the contractor had not provided the mechanic’s lien waivers that were a precondition to release of the retainage.

The other case in this issue involves the change order procedure in a fixed-price home construction contract. Neither party had followed the contractual procedure over the course of the project. Could the homeowners still challenge the builder’s pricing of upgraded or extra work?

AIA contract documents were silent as to whether interest on late progress payments also applied to the final payment of contract retainage. The contractor, however, had never provided the lien waivers required for final payment. Consequently, no interest could accrue to the unreleased retainage.

A fixed-price construction contract for a new home required advance written change orders, priced and signed, for changed work. The homeowners, through a course of conduct, waived the right to enforce that clause; however, they could still challenge the pricing of upgraded or extra work.

Most construction contracts include an “order of precedence” clause. The various contract documents are listed and the clause states that in the event of a conflict or discrepancy within the documents, the documents shall take precedence in the order listed. It is easy to view these clauses as dry boilerplate. In actual application, however, they can be significant.

The contract plans for a street improvement project depicted sidewalks to be constructed, but did not indicate pedestrian walkways or crossovers. Standard highway specifications, incorporated by reference into the contract, called for such pedestrian protections during construction. When a pedestrian was struck and killed, the order of precedence clause became crucial.

Another case also involved contract interpretation and safety responsibilities. An injured worker argued that the project architect, tasked with weekly monitoring of the construction site for contract compliance, should have detected and warned of an unsafe practice. Fortunately for the architect, the professional services agreement with the project owner spelled out what the architect was, and was not, responsible for monitoring.

The third case in this issue involves a contractor’s recovery under a termination for the convenience of the government clause. The federal government argued that the contractor’s breach of contract prior to termination barred any recovery of performance costs incurred before the effective date of termination. The contractor responded that the government should have terminated the contract for default if it wanted to hold the contractor responsible.

Project plans did not depict construction phase pedestrian safety measures, such as crossovers or walkways, even though standard specifications incorporated by reference into the contract called for such measures. This posed a conflict within the contract documents, which had to be resolved in accordance with the Order of Precedence clause.

An architect’s professional services agreement with a project owner defined the architect’s on-site responsibilities during construction. The agreement expressly disclaimed responsibility for safety practices. No extra-contractual duty was created simply by a design professional’s presence at a job site.

When the government terminates a contract for convenience, the government cannot argue that contractor recovery of performance costs is barred by the contractor’s prior breach of contract. The contractor, however, bears the burden of proving it actually incurred the claimed costs.

It is not unusual for project owners to furnish equipment or material for the contractor to use in a project. The motivation is usually financial. There is nothing improper about this practice so long as the use of the owner-furnished property is stipulated in the contract. However, if the equipment or material proves unsuitable for the project, the owner cannot hold the contractor responsible.

A federal appeals court addressed a situation in which an owner mandated the use of gravel stockpiled at the project site as the base for a paved parking lot. The owner designated a third-party materials testing company to evaluate the gravel. The company reported the gravel was suitable, and the contractor used the gravel. However, the pavement started to heave and crack as a result of inadequate drainage in the base, and the project owner sought to hold the contractor liable for breach of the contractual warranty.

The other case in this issue involves an equipment manufacturer that employed multiple licensed professional engineers at its production facility. A claimant alleged the manufacturer was practicing engineering.

A project owner mandated the use of material stockpiled on its site and designated a third-party testing company to evaluate the material for suitability. The owner could not hold the construction contractor responsible when the material proved unsuitable.

A firm that employs licensed professional engineers is not necessarily providing professional engineering services or engaging in the practice of engineering. Only evidence establishing the specific responsibilities of those employees can establish the practice of engineering.