§ 14.3 Claims on State and Local Public Agency Projects

LibraryConstruction Law in Oregon (OSBar) (2019 Ed.)
§ 14.3 CLAIMS ON STATE AND LOCAL PUBLIC AGENCY PROJECTS

§ 14.3-1 Oregon Little Miller Act (Public-Works Bond Claims)

All original contractors, subcontractors, and suppliers on Oregon public-works projects may make public-works bond claims under Oregon's Little Miller Act. ORS 279C.600. The claimant must provide a notice of the claim by certified or registered mail, or hand delivered, to both (1) the contractor that provided the bond and (2) the public body. Such notice must be provided within 180 days after the last substantial performance of labor, delivery of materials, or rental of equipment. ORS 279C.605. The statute of limitations for foreclosure of a claimant's bond claim is two years from the claimant's last day of work on the project. ORS 279C.610. For more detailed instructions on how to file a bond claim, see Form 14-1 and Form 14-2. For a discussion of Oregon's Little Miller Act, see § 10.6-1 to § 10.6-6.

§ 14.3-2 Common Claims for Additional Time and Money on Public Contracts

§ 14.3-2(a) Changes

Every public contract has a changes clause. Examples are found in federal construction contracts. FAR 52.243-4; FAR 52.243-7. Examples of a changes clause in a state public contract can be seen in ODOT Standard Specifications (see § 14.2-2(b)(5)) at 00140.30 and 00195.20. As noted in § 14.2-2(b)(5), changes clauses have the following provisions in common: (1) the owner can change the contract without voiding the contract or the bond; (2) the owner can order additional work; and (3) either in the changes clause or in a separate disputes provision, the contractor must continue with the changed work despite a dispute over whether the changed work is original contract work or changed work or despite a dispute over pricing of the changed work.

Disputes under the changes clauses, other than for pricing of work that the owner recognizes entitlement to, arise in two circumstances: (1) when the owner gives instructions to perform work outside the scope of the contract, and (2) when the owner provides defective plans or specifications.

In the first case, the contracting officer or public project manager gives the contractor an order to perform certain work that the contractor does not believe is part of the contract. If this occurs, the contractor must notify the owner that the requested work is extra or additional to the contractor and that the contractor must be paid under the changes clause for this work. Contractors must be familiar with the time limits relating to this notice to the owner because many contracts provide that the claims are waived if not timely raised. See, e.g., FAR 52.243-4. Every changes clause has its own notice provision that applies specifically to notice relating to entitlement or liability.

Almost every changes clause includes a second time limit that requires the contractor to provide its costs and pricing information relating to the changed work to the owner within a certain time period. See, e.g., FAR 52.243-7. The contractor should also comply with this provision. At times, the disputed work continues past the second time limit. One way the contractor can comply is to submit its costs with each monthly pay estimate.

At times the contractor is unsure of the effect of the change at the time the change is made because the contractor is unsure of the effect of the change on the total project. The contractor should then put the owner on written notice that the contractor cannot price out the change within the time limits. Furthermore, the contractor should obtain an agreement with the owner that the contractor can price the effects of the change once they are known. If the contractor cannot obtain an agreement, then the contractor should provide the owner with the costs on a monthly basis as the costs occur. Another option for the contractor is to forward-price the cost of the additional work on the entire project within the second time period, rather than changing the pricing as information becomes available over time.

The contract usually has a provision that additional work must be paid as either unit price work or force account work, whichever applies. Many contracts state explicitly how the force account work is to be paid. This provision usually boils down to labor, material, equipment, and overhead. If the equipment is rented, the rental rates are paid. If the equipment is owned, the rate is often tied to a specific book value, such as those specified in the EquipmentWatch Cost Recovery software, formerly known as the Rental Rate Blue Book. See < www.equipmentwatch.com >. Often, the contract specifically prescribes the overhead rates.

The second area of dispute that is recognized under the changes clause is the defective-specifications claim. This is also known as a claim for the breach of the warranty of the plans and specifications. As the court stated in A.H. Barbour & Son, Inc. v. State Highway Comm'n, 248 Or 247, 257, 433 P2d 817 (1967), "[t]he specification is in the nature of a warranty that, if it is complied with, satisfactory performance will result." This principal was affirmed in Gen. Constr. Co. v. Oregon State Fish Comm'n, 26 Or App 577, 581-82, 554 P2d 185 (1976) (allowing contractor's breach-of-contract action when survey performed by owner's consultant was incorrect). For further discussion of breach of the warranty of the plans and specifications (i.e., the Spearin doctrine), see § 14.2-3(c)(2).

Claims based on defective plans or specifications are cognizable under the changes clause. The written notice required by the changes clause would not come into play until the contractor realizes what the problem is. This may be well after the contractor has tried to comply with the defective plan or specification. The contractor might expend significant effort attempting to comply before realizing that building in accordance with the plan or specification is in fact not possible. The pricing provisions of the changes clause are usually held to apply to the contractor's additional work to remedy the defective specification. Regardless of the contractor's claims under the changes clause, the contractor must generally proceed with the work while the dispute is resolved.

§ 14.3-2(b) Differing Site Conditions

Most public contracts include clauses dealing with differing site conditions. See FAR 52.236-2 for the federal version and 00140.40 and 00195.30 for the ODOT Standard Specifications (see § 14.2-2(b)(5)). Differing site conditions and the standards for establishing them are discussed in § 7.5-9(a) to § 7.5-9(d).

Generally, bidders are entitled to rely on representations made by the government in solicitations. United States v. Atl. Dredging Co., 253 US 1, 10, 40 S Ct 423, 64 L Ed 735 (1920) (bidder entitled to rely on the accuracy of information contained in the solicitation); Dawco Constr., Inc. v. United States, 18 Cl Ct 682, 692 (1989), aff'd in part, rev'd in part, 930 F2d 872 (Fed Cir 1991) ("The prospective bidder is entitled to rely on the accuracy of information included in the solicitation."); Calvada, Inc., ASBCA No 2062, 56-2 BCA ¶ 1033 (when government represents subsurface conditions, bidder is entitled to rely on representations).

Owners often place exculpatory language in the contract that will attempt to nullify the effect of any depiction of the subsurface conditions. The language provides that the boring logs are for information only and not part of the contract and cannot be relied on by the contractor for any pre-bid determination of the subsurface conditions. Some courts have found that when the exculpatory clause is more than cautionary and excludes the subsurface information from the contract, the contractor is not required to review it pre-bid or pre-proposal. See Randa/Madison Joint Venture III, ASBCA No 2062, 99-2 BCA ¶ 30,553.

Moreover, if the boring logs are completely excluded, this fact may not negate other contract indications relating to subsurface conditions, particularly when these contract indications are patent. One example of a patent indication is any positive contract indication that tells the contractor what to expect beneath the surface. The "surface" is not necessarily limited to the ground; it can also be a wall, ceiling, or roof. The surface is any impediment that prevents the bidder from seeing what is behind or beneath it. See, e.g., Vann v. United States, 190 Ct Cl 546, 420 F2d 968 (1970) ("surface" was surface of ocean); Technocratica, ASBCA No 39675, 90-3 BCA 22947 ("surface" was suspended ceiling); Transco Contracting Company, VABCA Nos 921, 933, 71-2 BCA ¶ 9129 ("surface" was paint).

All differing site-conditions clauses have notice provisions that require prompt written notice to the owner's contracting officer or project manager so that the owner can investigate the alleged differing site conditions before they are disturbed. See, e.g., ODOT Standard Specifications 00140.40. Also, differing...

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