additional compensation Archives - Attorney Scott S. Orenstein

Recent Supreme Court Case Teaches Important Lessons

It is no secret that public works construction is a difficult business. On any given project there are innumerable ways that things can go wrong. With any project involving excavation and underground utilities, encountering changed conditions should not be a surprise. Of course, such changed conditions are not the contractor’s responsibility. What is the contractor’s responsibility, however, is providing the public owner with proper notice of its claims in accordance with the subject agreement.

One of the reasons public works construction projects are more onerous than their private counterparts is because public owners rarely negotiate contract terms. Contracts that are slanted significantly in the public owner’s favor are the norm. Thus, as the contractor in a recent state Supreme Court decision learned, it is vitally important to read the contract and abide by its terms.

One of the lessons from Old Colony Cosntr., LLC v. Town of Southington, 316 Conn. 202 (Conn. April 21, 2015) is that general assertions of entitlement to damages and/or additional contract time is not sufficient when the contract requires more detail. During the long duration of the project, the contractor in Old Colony repeatedly indicated that each problem that occurred impacted its schedule and costs.

Contractors Have Statutory Rights That They May Assert During Payment Disputes

A recurring problem in the construction industry is the failure of owners to issue timely payments. The problem not only affects contractors but also the subcontractors and/or suppliers who have to wait for the money to pass through the project’s general contractor and/or a higher tier subcontractor. Most contractors are aware of their right to secure payment of the monies owed through a mechanic’s lien (private work) or by filing a payment bond claim (public work or private work if applicable) but there are statutory rights of which contractors should be aware.

Connecticut General States § 42-158i defines a “construction contract” as “any contract for the construction, renovation or rehabilitation in this state on or after October 1, 1999, including any improvements to real property that are associated with such construction, renovation or rehabilitation, or any subcontract for construction, renovation or rehabilitation between an owner and a contractor, or between a contractor and a subcontractor or subcontractors, or between a subcontractor and any other subcontractor” but excludes contracts between a contractor and any local, state, or federal government, and it excludes contracts for building residential structures with less than 4 units. Id.

According to § 42-158i,

Recent OCIP Decision Reminds Contractors About the Importance of Contract Language

In recent years, Owner Controlled Insurance Programs (“OCIP”) have become more prevalent in public and private construction projects. An OCIP “is a class of ‘wrap-up’ insurance that provides coverage for many construction project participants under one program.” Capstone Bldg. Corp. v. Am. Motorists Ins. Co., 308 Conn. 760, 767 (Conn. 2013). Such programs typically include commercial general liability insurance and worker’s compensation insurance. In general, OCIPs reduce a project’s overall cost because the owner does not have to pay the multiple layers of duplicative administration associated with the general contractor and each subcontractor having its own insurance coverage. The general understanding is that the project owner benefits from the savings but a recent Superior Decision reminds us that contractual duties and obligations are derived from the plain language of the contract and not what may reasonably inferred.

In Elevator Serv. Co. v. Reg’l Scaffolding & Hoisting Co., 2013 Conn. Super. LEXIS 687 (Conn. Super. Ct. Mar. 27, 2013), Elevator Service Co., Inc. (“Elevator Service”) and Regional Saffolding & Hosting, Inc. (“Regional Scaffolding”) entered into an agreement pertaining to a project known as the Royal Bank of Scotland (the “Project”). The issue before the court was whether Elevator Service had to pass along to Regional Scaffolding a discount that it received through the subject project’s OCIP.

What to Do When You Don’t Have Time to Wait for a Written Change Order

One of the most litigated construction law issues is whether a contractor is entitled to payment for additional work performed without a fully executed written change order. Most construction contracts state that the contractor is not entitled to payment for any additional work, unless the additional work is performed pursuant to a written change order that has been sign by the owner, contractor and the architect. The problem is that — because time is money — waiting for a signed change order is often costly so most contractors move forward with additional work based upon verbal agreements with the intention of executing a written change order at a later date.

Most of the time, no problems arise from having performed additional work without first having a written change order. The parties abide by their verbal commitments, which are then incorporated into the written change order required by the contract. Once in a while, however, an owner will refuse to issue payment for work that was performed without a written change order despite an oral agreement being reached during the project. In these situations, some courts have enforced the contract provision requiring written change orders and have denied the contractor the right to recover payment for his work.

Scott Orenstein
10.27.2010
Construction Law, Contract Law, Contractor Defenses, Public Owner

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