By Bruce Jervis
The “total cost method” for quantifying construction claims has long been controversial. In situations where it is allegedly impractical to itemize increased direct costs, a contractor is allowed to total its actual costs, subtract its bid price, and impute the overrun to the project owner. The contractor need only show that its bid was reasonable, its actual costs were reasonable, and it was not at fault for the situation causing the cost increase. It is no wonder claim defendants and their representatives loathe the total cost method.
A recent federal appeals case should cause more consternation. A dredging subcontractor was allowed to price a claim against the prime contractor using the total cost method. The sub presented no independent evidence that it had been impractical to track its actual increased direct costs. Instead, the subcontractor’s technical witness, a bucket-dredging expert, told the jury it would have been impractical to itemize direct costs. The jury awarded the subcontractor more than $2.9 million. The Sixth Circuit allowed this to stand. It had been the jury’s role to evaluate the credibility of the expert witness’ testimony. ... Read more.
Featured in This Week’s Construction Claims Advisor:
- Expert Allowed to Use “Total Cost Method”
- “First Spade Rule” Gives Mechanic’s Liens Priority over Mortgage Deed
- Payment Bond Statute Provided Sole Means for Attorney Fee Recovery
By Steve Rizer
An ability to save time can prove to be one of the greatest benefits of a guaranteed maximum price (GMP) contract, Trauner Consulting Services Inc. Principal Scott Lowe told a group of professionals attending a webinar that WPL Publishing held Sept. 20. “Why is that? Well, because we’re not relying on a lump-sum price, scoping for the project does not have to be complete -- we don’t have to have a completed design -- which means we can begin construction before the design is complete. The sooner we can begin construction, the more time savings we potentially might be able to realize, so, very often, the greatest benefit that GMP contracting can offer to us is a savings in time….”
Lowe noted that GMP contracting is “quite popular” in the private sector, where the amount of time it takes for a project to get up to speed, online, generate revenue, generate rents, or make sales is “extremely important to the overall fiscal sanity of the project.” Therefore, even small savings in time “can have a huge impact on the financials of a project,” he said. ... Read more.
By Steve Rizer
California has launched what is believed to be the largest property assessed clean energy (PACE) program in the United States, but how successful will CaliforniaFIRST be in fostering commercial energy and water improvements both within the state and, perhaps eventually, nationwide?
On Sept. 18, 14 California counties and 126 cities in the state launched CaliforniaFIRST, allowing commercial property owners to use municipal bonds to finance energy-efficiency, water-efficiency, and renewable-energy upgrades, which owners repay through a special assessment on their annual property tax bills. Through a public-private partnership, private capital will be used to supply upfront funding for the work so as not to strain the budgets of local governments. ... Read more.