Dealing With One Sided Public Contracts- Surviving The Death Star

z
Presented by Don Gregory
April 10, 2018
Dealing with
One-Sided Public
Contracts
Surviving the
Death Star

z
Shortage of Skilled Labor and
Sustained Competition for
Stagnant Public Projects
Greater Sophistication of Public
Owners + Public Contracts
No Ability of Bidder to Alter
Terms
Trend by the Courts to Literally
Apply Contract Terms

z
Little multiple prime contracting
Trends after
Construction
Reform
Trading off 5-10% mark-up on bid
day for 1% cost of claims at end of job
Subs 10 days further away from payment
More subjective selection of CM, etc.
Big contractors benefit, family, locally
owned not so much
“My way or the highway” approach of
owners to disputes
“Pay if paid” passes owner pain
through to subs

z
Contractors are Fond of
Tardy + Casual Notice
Don’t want to “rock the boat” –
see how it works out

z
Actual notice was
good enough in
the old days
Typically found in daily reports,
meeting minutes and other
routine jobsite documentation

z
THE GOAL:
Survive the
Death Star!

z
Provide
knowledge on
what contract
requires
Better document
impacts and
recover extra
time and money
Provide strategies
for overcoming
impossible to
satisfy contract
terms
Explain what
rights contractors
have outside the
contract

z
What tools are available
to contractors?
Document Change Orders
Document Requests for Time +
Money Thru Article 8
Argue Waiver
Argue Unenforceability Under Fairness
in Construction Contracting Act

z
How to Get Paid for
Change Orders

z
Changes are common
How to get paid for changes
is another matter

z
“We’ll work it out later:
let’s just get the job done.”

z
This leads to unresolved change orders
You deliver the work
And then talk about payment once you
no longer have leverage
No leverage = nasty one-sided
negotiations
“We’ll work it out
later: let’s just get
the job done.”

z
Never leave
extras on the
table
How to resolve
change orders in
your favor
Know what the
contract says
about changes
Follow it
Make sure
superintendents
+ PMs are
trained

z
Contracts are getting very
specific about changes

z
Proceeding Without a Change Order or
Written Direction is Risky

z
Ohio Courts have stressed the importance of
following a contract’s notice requirements
NOTICE
Provisions

z
If the contract says so, failing to timely provide notice
of a change in the time required by contract may
waive a contractor’s right to any claim for a time
extension or mitigation of liquidated damages
NOTICE
Provisions

z
Failing to Follow Notice Provisions is Risky

z
So submit your changes
claims timely!
In the past, state contracts
required a claim to be submitted
prior to contract completion

z
KEY POINTS
from Several
Recent Ohio
Cases

z
Follow contract’s
notice provisions
and request an
extension of time

z
Requests for
additional
compensation
should be based on
owner-caused
delays

z
A change order management
program starts from your
notice of award and proceeds
through final payment
Notice of
Award

z
Thoroughly
review contract
documents
before signing

z
Alert your project
team to notice
requirements

z
GIVING
NOTICE
4 Basic
Methods
RFIs
Discussion in
meetings
Letters/Emails
Conversations
with owner’s
reps or GC

z
Unless you indicate otherwise, we
will proceed with the additional work
as we were directed in the progress
meeting earlier today and this e-mail
shall serve as continued notice of our
intention to receive additional
compensation for this change
LANGUAGE
To Protect Yourself

z
The contract will govern
the process of resolving
change orders
Changes Clause
Notice
Provisions

z
Identify issue and establish file
How to Get
Paid for
Change Orders
Give contract-specified notice
Define scope of change
Notify your lower tiers
Estimate costs + schedule for work
Prepare a change order request
Submit + negotiate a change order
Do the work
Get paid or enter dispute resolution

z
Don’t get burned by signing
a partial payment release or
change order with broad
waiver language

z
Change orders should
include costs for that
respective change
Be careful when
signing change orders
or partial payment
releases
Partial payment
releases should be
based on payment
received
Same applies to any
updated schedules
required to be signed

z
Typical
change order
includes all
costs
associated

z
When there
are concerns a
change order
will not
provide
sufficient
compensation
LETTER
We have only priced the direct costs, so
Change Order Number ___ is returned to
you as executed with one exception and
deletion. We have deleted and initialed the
portion of the change order that would
waive claims for any delays, inefficiencies,
disruption or suspension, extended
overhead, acceleration, and the cumulative
impact of this and other change orders
issued to this date. Please return an
executed and initialed copy to us. No
additional time or costs are sought as of
this date based upon what is reasonably
foreseeable now; however, we are not
waiving claims for additional time or costs
should circumstances change.

z
Broader and More Aggressive Language

z
Broad and Aggressive Change Order Language
Used on ProjectONE

z
How Might You Revise Broad Language

z
Be Careful When Signing Waivers for Partial Payment

z
With its signature, Contractor does not verify the accuracy of the schedule nor
does it waive any claim with respect to additional costs it may incur as a result
of: (a) changes to previous schedules; (b) additional costs for unresolved issues it
has previously provided notice of; (c) additional costs if the work does not
proceed in accordance with this schedule because of others; or (d) any other
costs arising out of related to other matters beyond its control.
LANGUAGE
To Insert

z
And if you don’t
get paid…
Follow the Dispute
resolution process in
the contracts

z
How to Recover
Time + Money
on Requests for an
Equitable Adjustment
Under the Article 8 Process

z
3 Key Documents
Needed to Stay in
the Hunt

z
Written Notice +
Request For
Extension of Time

z
10 Day Requirement to Provide Written Notice
Differing Site Condition
determination
receiving an RFI response
rejection/reduction of a
change order proposal or
field work order
10 DAYS AFTER
the “occurrence”

z
Written
Notice +
Request for
Extension of
Time

z
Sample Notice and Request For Extension of Time Letter
Address it to everyone!

z
Other Components of the Notice
and Request for Extension of Time Letter

z
In most
cases,
request an
extension
of time

z
Acceleration
will occur if
extension is
not granted

z
Certified Claim Submission
Notarized Certification
Income Statement/Ledger
30 days from when
notice was submitted
Failure to Company =
Waiver of Claim

z
Starts the two-year
countdown to resolve
or claim is waived

z
Certified Claim Example
Certified Language + Notarized

z
Direct Costs for
Disputed Scope
of Work Items
Basic
Components
of a Claim
Extended
General
Conditions
Labor
Productivity
Home Office
Overhead

z
Jobsite resolution meeting
scheduled within 30 days
Written recommendation
from either the architect or
CM issued 14 days after
jobsite resolution meeting
After Submitting the
Certified Claim

z
Issuance of the Written Recommendation Triggers Prime
Contractor’s Requirement to Appeal

z
Another meeting scheduled
with the public authority
Final decision rendered
regarding claim
After Making
the Appeal
Concludes Article 8 process
and next step is to file suit

z
Graphic Timeline for Notice and Claim Submissions
Occurrence of event for
possible claim (for example
revised schedule)
10 Days -
submit Written
Notice
30 Days-
Submit
Certified Claim
120 Days-
Obtain Final
Administrative Decision or
Exhaust Jobsite Dispute
Resolution Process
2 Years –
File Suit or Waive It
Free To
File Suit
14 Days – AppealJobsite Resolution
and Recommendation
Issued
Appeal Meeting
and Final Decision

z
Provide Notice Early And Often
Be Sure To Request An Extension Of Time
Keep Track Of Your Costs Preferably On A T&M Ticket
Summary of Ways to DEAL WITH A DELAY CLAIM
Don't Sign a "No Cost Time Extension Change Order“
Read Your Change Orders And Lien Waivers Carefully
Be Careful About Signing Schedules When You Have A Delay Claim Pending
Organize And Submit Your Claim As Soon As Possible
Better To Give A "Range Of Costs" And Submit It Early Than It Is To Wait
Consider Bringing In A Schedule Consultant Early

z
Death Star
Supplementary
Conditions
Owner recovers
legal fees,
contractor does not

z
What About Bricker’s Modified General Conditions?
SETTLEMENT OFFERS:
If the Contractor initiates a Claim, the Owner may make one or more “Section 4.7.10 Settlement Offer”
to settle the Claim at any time up to the date of the trial. Such settlement offer shall be subject to Rule
408 (Compromise and Offers of Compromise) of the Ohio Rules of Evidence. If at any stage of the
litigation, including any appeals, the Contractor’s Claim is dismissed or found to be without merit, or if
the damages awarded to the Contractor on its Claim do not exceed the Owner’s last 4.7.10 Settlement
Offer, the Contractor shall be liable to the Owner and shall reimburse the Owner for all the Owner’s
attorneys’ fees and expenses, including expenses and fees paid to consultants related to the Owner’s
pursuit of the Claim, arising out of or related to such Claim.

z
What About Bricker’s Modified AIA General Conditions?
INDEMNITY:
To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner,
Construction Manager, Architect, and Architect’s consultants, and agents and employees of any of them
from and against claims, damages, losses and expenses, including but not limited to attorneys’ and
consultants’ fees and defense costs, arising of or resulting from performance of the Work and caused in
whole or in part by the Contractor’s acts or omissions. The Contractor’s obligations under Section
3.18.1 are joint and several.

z
Escape from the
Death Star
How do you survive if
you don’t document
perfectly?

z
One-sided contract with
extensive notice/claim
provisions
THE PROBLEM
Owners successfully
arguing for strict
construction of these
provisions

z
Public owners are
successfully arguing for
STRICT enforcement of
these notice provisions

z
Cleveland Construction, Inc.
v. Kent State University
Issued: June 24, 2010
Providing notice within 10 days
after the occurrence
Important to comply with
Article 8 provisions

z
Stanley Miller v. OSFC
Issued: December 28, 2010
Enforced Article 8 claim
submission requirements

z
Peterman Plumbing &
Heating, Inc. v. Board of
Education Pickerington
Local School District
Issued: December 30, 2010
Enforced contract’s 21-day
requirement to provide notice

z
It all started with
Dugan & Meyers…

z
At trial…
Spearin doctrine: public owner warrants
sufficiency of plans
Change order satisfies? Discussion didn’t
include cumulative impact
Owner had actual notice
Asking for an extension would have
been a “vain act”

z
Spearin does not apply to delay claims
for insufficient plans.
Actual notice does not constitute waiver
of contract
On Appeal at the Ohio
Supreme Court

z
If you don’t comply
perfectly, should
you give up?

z
Dugan & Meyers
Did not consider the effect of the fairness in
construction contracting act
Did not invalidate the Spearin doctrine
Did not say that a contractor can never prove the
owner waived strict compliance with the contract

z
In LEGALESE
“When the acts and conduct of a
party are inconsistent with an
intent to claim a right, and have
therefore misled the other party
to his prejudice and thereby
estop the party having the right
from insisting upon it.”
What Is
Waiver?

z
In ENGLISH
The owner isn’t following the
contract, so you shouldn’t have
to either.
What Is
Waiver?

z
The Point of Dugan & Meyers
Actual notice alone will not equal waiver
“Something more than actual notice on the part of the state is
required to excuse a contractor from complying with its
obligations regarding change-order procedures in public works
contracts” - Stanley Miller
But, notice may still be evidence of waiver

z
Craft v. City of Urbana
NOTICE AS WAIVER
Failure to submit claim within contractually allotted time “did not defeat
the contractor’s claim since the city had independent knowledge of the
condition complained of and had oral notice of the contractor’s
complaint and the city was not prejudiced by lack of earlier notice.”
Never overruled.

z
If notice alone is not enough,
what constitutes waiver?
J&H v. OSFC, Ct. Cl.
2012
Extensive Notice…
12-14 Letters Over 4
Months
No Action
“Bovis ignored many of the
letters, and in those
instances where a response
was made, J&H was
informed that is requests
were not in compliance with
Article 6 of the contract”
But,
“72–hour Notices”

z
OSFC argued that J&H failed to
strictly comply with
the contract, and thus its
claim was barred
The Referee Disagreed
““the correspondence between and among
Bovis employees, demonstrate a lack of good
faith and fair dealing by Bovis and OSFC with
respect to J&H. For example the statements
‘paint J&H as instigator’ and ‘watch fireworks’
were made in reference to the strategy of
pitting other contractors against J&H”

z
Not only did the owner have notice, its
conduct demonstrated a lack of good
faith and unwillingness to resolve any
claim, regardless of whether J&H strictly
complied with the contract
“OSFC’s insistence upon strict compliance
with Contract notice requirements was
nothing more than a strategy employed
by OSFC and Bovis to prevent J&H from
filing a claim…such conduct on the part
of OSFC constitutes a waiver of strict
compliance with notice requirements.”

z
Keep sending notice to
the owner, even if:
The owner ignores you
Then demands compliance
with Article 6
Communicate your
understanding that
the owner is waiving
strict compliance with the
contract when it ignores
your notices, requests for
extensions, or claims
Make it clear that
you are not waiving
your Article 8 rights by
participating in any
“informal” change order
procedures

z
Any other ways out?
Romanoff v. ODAS; J&H v. OSFC
Cleveland Constr. v. OPERS
Cleveland Constr. v. Kent State

z
Fairness in Construction
Contracting Act –
R.C. § 4113.62
Contractors
Have a Friend in

z
Fairness in Construction
Contracting Act provides:
Nothing in a contract or
change order can waive
responsibility for the “owner’s
acts or failure to act”

z
No Damage for Delay Clauses
Waiver of Bond Rights
Subject to Foreign State Law
What Type of Contract Provisions are
UNENFORCEABLE
Forced to Arbitrate or Litigate Out of State
Final Payment as Waiver If Prior Notice

z
How to Use the Fairness in
Construction Contracting
Act to Trump Unfair Clauses
Couch impacts in context and language of “delays”
Focus on owner’s actions and inactions (including owner agents like A/E and CM)

z
What Does
CCI v. OPERS
Provide?
No need to ask for time
extension when owner (action or
inaction) causes delay
Article 6 (“boilerplate notice”) of
State’s general conditions
unenforceable to some degree
“Delay” also means acceleration

z
Sole remedy for delay is a time
extension
Owners not responsible for
failures of Other Prime
Contractors
Examples of
Unenforceable
State General
Conditions
6.2.1.5
8.6

z
Owner’s Failure to
Properly Schedule
May constitute a breach of
contract and excuse the
contractor’s performance

z
Owner’s Failure to Disclose
Superior Knowledge
May render an
exculpatory clause (like
Article 8) ineffective

z
Don Gregory
Kegler Brown Hill + Ritter
dgregory@keglerbrown.com
keglerbrown.com/gregory
614-462-5416

Dealing With One Sided Public Contracts- Surviving The Death Star

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (20)

Similaire à Dealing With One Sided Public Contracts- Surviving The Death Star

Similaire à Dealing With One Sided Public Contracts- Surviving The Death Star (20)

Plus de Kegler Brown Hill + Ritter

Plus de Kegler Brown Hill + Ritter (20)

Dernier

Dernier (20)

Dealing With One Sided Public Contracts- Surviving The Death Star