Washington Construction Law Recent Case Update

Transcription

1 Washington Construction Law Recent Case Update No-Damages Damages-for-Delay Written Notice By John P. Ahlers

2 No Damages for Delay Update 2 John P. Ahlers (206)

3 No Damage for Delay Clauses Contract provision stating that time extension is the sole remedy for a delay. RCW Any such clause is against public policy and is void and unenforceable. 3 John P. Ahlers (206)

4 Washington s Statutory Prohibition of No Damage For Delay Clauses RCW (enacted 1979) Any clause in a construction contract... which purports to waive, release,, or extinguish the rights of a contractor, subcontractor, or supplier to damages or an equitable adjustment arising out of unreasonable delay in performance which delay is caused by the acts or omissions of the contractee or persons acting for the contractee is against public policy and is void and unenforceable. 4 John P. Ahlers (206)

5 No Damage for Delay Clauses Open Issues: Only unreasonable delays barred by statute Nominal contract remedy may be enforceable Use of reciprocal liquidated damages in public contracts 5 John P. Ahlers (206)

6 Is It or Isn t It A No Damage for Delay Clause Prohibited By RCW ? Cooperation With Other Contractors, Section (WSDOT 2006) The Contracting Agency may perform other work at or near the site... with other forces than those of the Contractor. This work may be done with or without a contract John P. Ahlers (206)

7 Section (cont.) The coordination of the work shall be taken into account by the Contractor as part of the site investigation... and any resulting costs shall be incidental and included within the unit bid prices in the contract. 7 John P. Ahlers (206)

8 No Damage For Delay Clauses Utilities and Similar Facilities, Section (WSDOT 2006) When others delay the work through late removal or relocation of any utility or similar facility, the Contractor s loss of time will be adjusted by extending contract time in keeping with Section [Extensions of Time]. 8 John P. Ahlers (206)

9 Section (cont.) Any costs resulting from the coordination and prosecution of the work regarding utility adjustment, relocation, replacement, or construction shall be at the Contractor s expense as provided in Section John P. Ahlers (206)

10 No Damage For Delay Clauses Progress Schedule, Section (WSDOT 2006) The Contracting Agency allocates its resources to a contract based on the total time allowed in the contract. The Contracting Agency will accept a progress schedule indicating an early physical completion date but cannot guarantee the Contracting Agency s resources will be available to meet the accelerated schedule. 10 John P. Ahlers (206)

11 No Damage For Delay Clauses Section (cont.) No additional compensation will be allowed if the Contractor is not able to meet their accelerated schedule due to the unavailability of [the] Contracting Agency s resources or for other reasons beyond the Contracting Agency s control. 11 John P. Ahlers (206)

12 Scoccolo Construction v. Renton Contract for street widening. Contract stated relocation of utilities would be by utility companies. Scoccolo required to coordinate relocation with utility companies. 12 John P. Ahlers (206)

13 Scoccolo Construction v. Renton Contract provided: No additional compensation will be made to [Scoccolo] for reason of delay caused by actions of any utility company and [Scoccolo] shall consider such costs to be incidental to the other items of the contract. 13 John P. Ahlers (206)

14 Scoccolo Construction v. Renton Puget Power did not timely complete relocation of the overhead power lines with underground lines. Scoccolo was delayed and damaged. DELAY 14 John P. Ahlers (206)

15 Scoccolo Construction v. Renton Renton's Motion for Summary Judgment based upon the exculpatory contract provision was granted by trial court. Court of Appeals initially reversed but does not directly address the question of whether RCW invalidated the no damage for delay clause of the contract. 15 John P. Ahlers (206)

16 Scoccolo Construction v. Renton On remand, a jury awarded Scoccolo damages ($1 million). Renton appealed for a second time. 16 John P. Ahlers (206)

17 Scoccolo Construction v. Renton The Court of Appeals reversed, thereby invalidating a substantial portion of Scoccolo s jury verdict. The Court held that the utilities were not a person acting for the contractee and therefore the statute did not apply. 17 John P. Ahlers (206)

18 Scoccolo Construction v. Renton Utilities were not a person acting for the contractee despite the fact that the City had written franchise agreements with the utilities which gave it the power to compel the relocation. 18 John P. Ahlers (206)

19 Scoccolo Construction v. Renton Scoccolo had no contractual power to compel the utilities to act. Scoccolo was not in contractual privity with the utilities, therefore Scoccolo cannot pursue the utilities for its delay damages. 19 John P. Ahlers (206)

20 Scoccolo Construction v. Renton Court of Appeals 2005 decision is first reported case to interpret RCW Decision s narrow interpretation of phrase person acting for the contractee likely to result in more owners attempting to reinsert no damage for delay clauses back into their contracts. 20 John P. Ahlers (206)

21 Scoccolo Construction v. Renton Supreme Court Ruling Unanimous verdict in favor of Scoccolo, the utilities were acting for the City. RCW (No Damages for Delay Statute) trumped the exculpatory clause (no compensation for utility company delay). Scoccolo s $1 million is restored. 21 John P. Ahlers (206)

22 Notice Update Post Mike M. Johnson 22 John P. Ahlers (206)

23 3 Elements of Notice 1) Event (Notice of the Event) 2) Claim (Notice of the Claim) 3) Claims Process and Procedure OF EVENT 23 John P. Ahlers (206)

24 Standard Specifications (2004) / WSDOT & Municipal Projects Section (if Contractor is in disagreement with any change order, direction or instruction by Engineer) [Notice of Event] 1. Signed written notice of protest before doing the work. 24 John P. Ahlers (206)

25 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) 2. Supplement written protest within 15 days in writing with the following: (a) Date of protested order; (b) Nature and circumstances which caused the protest; (c) Contract provisions that support protest; 25 John P. Ahlers (206)

26 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) (d) Estimated dollar cost and how estimate was determined; and (e) Analysis of progress schedule showing schedule change or disruption if Contractor claims a schedule change or disruption. 26 John P. Ahlers (206)

27 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) Section (2) 1 Claim [Notice of Claim] 1. Detailed factual statement of claim for additional compensation and time, providing all necessary dates, locations, and items of work affected. 2. Date on which the facts arose which gave rise to the claim. 27 John P. Ahlers (206)

28 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) 3. Name of each Contracting Agency individual, official, or employee involved in or knowledgeable about the claim. 4. Specific provisions of the Contract which support the claim and a statement of the reasons why. 28 John P. Ahlers (206)

29 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) 5. If the claim pertains to discretionary decisions of the Engineer or matters for which the Engineer s decision is final, set out in detail all facts supporting Contractor s position. 6. Identification of any documents and the substance of oral communications supporting the claim. 29 John P. Ahlers (206)

30 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) 7. Copies of any identified documents, other than Contracting Agency documents and documents previously furnished by Contractor, that support the claim. 8. If additional time is sought: (a) Specific days and dates for which time is sought, 30 John P. Ahlers (206)

31 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) (b) Specific reasons why the time extension should be granted, (c) Specific provisions of Section under which time is sought, and (d) Analysis of Contractor s progress schedule to demonstrate reason for time extension. 31 John P. Ahlers (206)

32 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) 9. If additional compensation is sought, the exact amount sought and a breakdown of that amount into the following categories: (a) Labor (b) Materials (c) Direct equipment 32 John P. Ahlers (206)

33 Standard Specifications (2004) / WSDOT & Municipal Projects (cont.) (d) Job overhead (e) Overhead (general and administrative) (f) Subcontractor s claims 10. Notarized statement certifying validity of claim. 33 John P. Ahlers (206)

34 Mike M. Johnson, Inc. v. Spokane County, 150 Wn.2d 375 (2003) Spokane County Owner Mike M. Johnson Contractor Sewer Project 34 John P. Ahlers (206)

35 Mike M. Johnson, Inc. v. Spokane County WSDOT Specifications April 1998 Award County notified Contractor at the preconstruction conference of road widening which caused a revision of the storm sewer. June 4, 1998 Change Order 3 revised the design of the road and sewer ($69,000) changes clause. 35 John P. Ahlers (206)

36 Mike M. Johnson, Inc. v. Spokane County Mike M. Johnson made no objection or protest. (No Notice of event) Later, Mike M. Johnson encounters telephone cables (U.S. West). 36 John P. Ahlers (206)

37 Mike M. Johnson, Inc. v. Spokane County Specification Immediate signed written notice of protest before doing the work. Supplement written notice of protest within 15 days (5 requirements). No protest deemed acceptance. [MJM failed this step] 37 John P. Ahlers (206)

38 Mike M. Johnson, Inc. v. Spokane County Specification Failure to follow protest procedure as a waiver. If protest fails to achieve resolution, must submit claim (10 requirements). Failure to follow claim procedure is waiver of rights. [Consequence of lack of Notice] 38 John P. Ahlers (206)

39 Mike M. Johnson, Inc. v. Spokane County June 26, 1998 MMJ letter: Lists seven concerns, one of which is the phone line causing additional costs and delays. (concerns and claims) July 16, 1998 County letter: Invites a claim. July 24, 1998 MMJ letter: Doing an analysis. 39 John P. Ahlers (206)

40 Mike M. Johnson, Inc. v. Spokane County August 3, 1998 County letter: No claim utility locate statute. August 7, 1998 County letter: MMJ letter too general and nonspecific regarding relief. August 14, 1998 MMJ letter: Expect compensation while waiting for U.S. West relocation. 40 John P. Ahlers (206)

41 Mike M. Johnson, Inc. v. Spokane County August 25, 1998 MMJ s lawyer s letter: $98,000/50 days. No supporting explanations, no reference to contract. January 27, 1998 County letter: Will negotiate, but no waiver. 41 John P. Ahlers (206)

42 Court s Decision Contractor did not comply with the protest procedure Contractor did not follow claim procedure Contractual condition precedent to Contractor s right to seek judicial relief. 42 John P. Ahlers (206)

43 Court s Decision Comments or concerns that do not include the amount of the claim or length of the delay are not in conformity with requirements of protest procedure John P. Ahlers (206)

44 Court s Decision (cont.) Actual notice by the Owner of the condition in i and of itself does not excuse a Contractor from complying with contractual notice provisions. Waiver is established only when the Owner has actual knowledge and directs the Contractor to proceed with the extra work. 44 John P. Ahlers (206)

45 MMJ Dilemma An Owner can: demand additional work outside the scope of the original contract, observe the contractor perform that work, discuss the work with the contractor, and yet deny fair compensation for services rendered if the contractor fails to submit a written request for compensation/time for the demanded work in the required format. 45 John P. Ahlers (206)

46 MMJ Dilemma (cont.) The Owner can direct work be done, and the Owner is not prejudiced by the Contractor s failure to abide by the technical requirements of submitting a claim for payment, but the contractor nevertheless forfeits its claim. 46 John P. Ahlers (206)

47 Weber Construction v. Spokane County, 124 Wn. App. 29, 98 P.3d 60 (2004) Road building project for Spokane County. 47 John P. Ahlers (206)

48 Weber Construction v. Spokane County Project was a cut and fill project whereby material excavated from the site was to be used for fill and embankments. Large boulders were encountered, unsuitable for fill and embankments. 48 John P. Ahlers (206)

49 Weber Construction v. Spokane County It was necessary for Weber to obtain pit run material from another site to make up for the lack of on-site material to build the roadway embankments. A claim was made by Weber for additional compensation as a result of the quantity and quality of the boulders encountered. (Notice of the Event?) 49 John P. Ahlers (206)

50 Weber Construction v. Spokane County On 8/12/99, the County issued Change Order No. 1 which permitted hauling of material from a private quarry and stated that the reason was that excavated material that was planned for use in building the roadbed and embankments contained large boulders that were not suitable for shallow fills and building embankments. (Notice of the Event?) 50 John P. Ahlers (206)

51 Weber Construction v. Spokane County The change order also specified the price for the import material, and an estimated quantity of 14,600 cubic yards. No price was provided for removing and wasting the boulders. (Notice of Claim?) The Standard Specifications applied. Weber protested the change order on 8/19/ John P. Ahlers (206)

52 Weber Construction v. Spokane County Weber supplemented its written protest on 8/31/99, and provided all of the required information except the estimate of the costs of the protested work.. Weber requested that the County identify a dump site for the boulders, and then Weber would provide the County with an estimate and how the estimate was made. [Notice of Claim? Claim = $$] 52 John P. Ahlers (206)

53 Weber Construction v. Spokane County The County steadfastly denied that a change condition existed, and that Weber had any entitlement, much less right to compensation. The County advised Weber of this by 9/8/99 letter. 53 John P. Ahlers (206)

54 Weber Construction v. Spokane County Although the County estimated the quantity of boulders at 14,600 cubic yards in the change order, ultimately over 40,000 cubic yards of boulders were hauled to waste and replaced with import material. The Project was shut down for the winter from 11/99 until 5/ John P. Ahlers (206)

55 Weber Construction v. Spokane County Weber worked full time from 11/99 through 3/00 compiling its costs of the impacts related to its change conditions claim. On 3/10/00 Weber submitted its certified, written claim for over $1,000,000 as required by the Standard Specifications. (Now had price) 55 John P. Ahlers (206)

56 Weber Construction v. Spokane County Weber offered to provide the County with full access to its job cost accounting records so that the County could audit the job costs. The County declined. The case was tried to a jury in Spokane County Superior Court. 56 John P. Ahlers (206)

57 Weber Construction v. Spokane County The trial judge dismissed the case at the conclusion of Weber s case finding that: 1. the existence of the boulders was foreseeable, and 2. Weber did not follow the contract procedures for requesting additional compensation in that it did not provide the estimated cost with its supplemental protest information. 57 John P. Ahlers (206)

58 Weber Construction v. Spokane County On 3/6/03, Division III of the Court of Appeals reversed on both counts, ruling that the issue of whether the County s actual notice of Weber s problems constituted waiver of strict compliance with the contract terms was a question of fact for a jury. 58 John P. Ahlers (206)

59 Weber Construction v. Spokane County Spokane County sought discretionary review from the Washington Supreme Court. Discretionary review was granted. 59 John P. Ahlers (206)

60 Weber Construction v. Spokane County Following the Supreme Court s decision in Mike M. Johnson,, it remanded the Weber case to the Court of Appeals for consideration in light of Mike M. Johnson. On July 27, 2004, the Court of Appeals, for the second time, reversed the trial court. 60 John P. Ahlers (206)

61 Weber Construction v. Spokane County There were two bases to the Court s opinion. First, the Court found that substantial evidence existed that Weber had complied with the requirement to provide required information to supplement its written protest as to the estimated cost of the work. 61 John P. Ahlers (206)

62 Weber Construction v. Spokane County (cont.) The Court found that because the County did not provide the requested information on the disposal of the boulders, Weber could not have stated in good faith how any such estimate was determined. (County precluded Notice Compliance) 62 John P. Ahlers (206)

63 Weber Construction v. Spokane County Substantial evidence supported Weber s compliance with the contract terms. The second basis for the Court s decision, was that the Court found that substantial evidence also existed as to the County s waiver of strict contractual compliance with the protest procedures. 63 John P. Ahlers (206)

64 Weber Construction v. Spokane County Waiver: The Court found that the County knew that Weber was required to provide a dollar cost estimate, and knew that Weber was aware of this requirement and was attempting to meet it. Weber requested information needed to provide the estimate, but the County failed to provide the information. 64 John P. Ahlers (206)

65 American Safety Casualty Insurance v. Olympia, Wn. App. Div. 2 (6/27/06) Contract for sanitary sewer lines between Olympia and Katspan. American Safety Casualty was Katspan's surety. Contract contained Standard Specifications including: 65 John P. Ahlers (206)

66 American Safety Casualty Ins. v. Olympia , 1 notice and protest, immediate notice with supplemental information within 15 days (Notice of Event) (1) 1 and (2), claim requirements (Notice of Claim) (3), 1 suit must be brought within 180 days of final acceptance (Claim Procedure) 66 John P. Ahlers (206)

67 Issue: Did Olympia Waive the Contract's Lawsuit And Protest Time Limits? Trial court said no on motion for summary judgment and awarded fees to Olympia. Court of Appeals reversed. 67 John P. Ahlers (206)

68 American Safety Casualty Ins. v. Olympia 1/5/01 City sent Katspan a letter granting 20-day time extension. Katspan disagreed by letter and referred to earlier letter. Neither letter complied with protest requirements. 68 John P. Ahlers (206)

69 American Safety Casualty Ins. v. Olympia 2/26/01 Katspan sent another letter to City seeking to preserve its right to request time and money and stating that it would prepare additional documentation. Katspan did not provide the documentation. 69 John P. Ahlers (206)

70 American Safety Casualty Ins. v. Olympia When project almost complete, City's representative sent Katspan two letters asking for the information Katspan had promised in its 2/26/01 letter. Katspan responded that the information would be coming shortly. It was never sent. 70 John P. Ahlers (206)

71 American Safety Casualty Ins. v. Olympia City's representative sent Katspan a letter requesting that it execute a change order for all additional work. Katspan refused. Katspan became insolvent and assigned its rights to American Safety. 9/10/01 City accepted project as complete. 71 John P. Ahlers (206)

72 American Safety Casualty Ins. v. Olympia 11/01 American Safety sought an equitable adjustment of $767,995. Request did not comply with claim requirements. 3/02 American Safety's attorney contacted City's attorney. 72 John P. Ahlers (206)

73 American Safety Casualty Ins. v. Olympia Thereafter, City advised it needed additional information and documentation to make the requested equitable adjustment. America Safety advised it was having difficulty obtaining the documents and asked if the City would negotiate without information. 73 John P. Ahlers (206)

74 American Safety Casualty Ins. v. Olympia City responded that it would proceed, but would not negotiate. It claimed it had inadequate backup information. 5/02 American Safety sent City two 3-ring 3 binders containing information. 8/02 City responded it needed additional information. 74 John P. Ahlers (206)

75 American Safety Casualty Ins. v. Olympia 11/02 City again requested additional information. 1/03 American Safety notified City that it had received 4 or 5 boxes from Katspan, and they were available for review. City reviewed the documents. 75 John P. Ahlers (206)

76 American Safety Casualty Ins. v. Olympia 4/23/03 City notified American Safety that the documents did not contain all of the requested/required information. City stated American Safety had until 5/16/03 to produce the information, and that if it failed, the City would deny the claim. Deadline was not met. 76 John P. Ahlers (206)

77 American Safety Casualty Ins. v. Olympia 7/31/03 American Safety through its consultant contacted the City to discuss information City was demanding. 8/4/03 City's accountant responded that he had been given the green light to discuss. 8/03 Consultants exchanged s E about information and how American Safety should format it. 77 John P. Ahlers (206)

78 American Safety Casualty Ins. v. Olympia 5/21/04 American Safety contacted the City to notify it that information was available. City responded and denied American Safety's claim and stated that it could no longer file suit because suit was untimely under the contract. 8/04 American Safety sued City. 78 John P. Ahlers (206)

79 American Safety Casualty Ins. v. Olympia Court of Appeals Decision: Court distinguished Mike M. Johnson.. City did not continuously express its intent to abide by contractual provisions. [Now standard] If City had no intention of allowing litigation, it should have informed American Safety. 79 John P. Ahlers (206)

80 American Safety Casualty Ins. v. Olympia City could also have halted all communication. City's continued requests for information, reference to future litigation,, and deadlines for production well beyond the contract limitations created inferences that the City waived the contract terms. 80 John P. Ahlers (206)

81 American Safety Casualty Ins. v. Olympia Court further found that issues of fact remained as to whether the totality of the circumstances resulted in an implicit waiver of the contract provisions for timeliness of claim and suit. 81 John P. Ahlers (206)

82 Strand Hunt Construction v. Lake Washington School Dist., Wn. App. Div. I (9/5/06) $37 million high school project Delay Impact caused by design conflict 82 John P. Ahlers (206)

83 Key Contract Document Provisions: Changes could be up to 10% of the contract amount. Compensation for changes based on direct cost plus a fee calculated as percentage of direct costs. 83 John P. Ahlers (206)

84 Key Provisions (cont.) Fee on changes is an allowance for all combined overhead, profit, and other costs, including all office, home office, and site overhead, and includes delay and impact costs of any kind. Claims to be submitted within 14 days of the event giving rise to them. [Claim Notice] 84 John P. Ahlers (206)

85 Key Provisions (cont.) Claims to include a clear description of the claim, the proposed change in the Contract Sum and/or time of the Claim and provide data supporting the Claim. [Definition of Claims] Claims not so made are waived. 85 John P. Ahlers (206)

86 Strand Hunt 6/29/03 Letter from Strand Hunt to District requesting compensation for inordinate number of RFIs caused by defective drawings. Over 1,500 RFIs. 400 were directly related to change orders. Strand Hunt preliminary figures of $752,053 in direct cost impacts and $426,045 for indirect costs for labor inefficiencies. 86 John P. Ahlers (206)

87 Strand Hunt District stated 6/29 letter did not constitute a claim and did not comply with contract requirements. 7/23/03 Strand Hunt sent District a letter entitled "Claim for Multiplicity Impacts." Requested $2,434,813 for an inordinate number of RFIs and other defects in contract documents. (Claim increased about 4 times.) 87 John P. Ahlers (206)

88 Strand Hunt District denied claim. 7/31/03 Strand Hunt filed suit. 11/04 Strand Hunt submitted "Consolidated Request for Equitable Adjustment" for $4,538,366. (Claim increased about 2 times.) 88 John P. Ahlers (206)

89 Strand Hunt District moved for partial summary judgment seeking dismissal of Strand Hunt's claims for cumulative impact damages, field overhead delay damages, and home office overhead damages because Strand Hunt failed to comply with contract requirements for claims. 89 John P. Ahlers (206)

90 Strand Hunt District further contended that claims for overhead were barred because they were indirect delay damages which could only be asserted in connection with direct damage claims. 3/7/05 trial court granted District's motion. 90 John P. Ahlers (206)

91 Strand Hunt 8/18/05 trial court entered order clarifying that its earlier order dismissed Strand Hunt's quantum meruit claims. Court of Appeals affirmed. 91 John P. Ahlers (206)

92 Strand Hunt Strand Hunt failed to comply with the requirements for submitting a claim. Court rejected Strand Hunt's contention that it would have been impossible for it to submit claims in the manner and time frame specified in the contract. 92 John P. Ahlers (206)

93 Strand Hunt Court did not understand how Strand Hunt could fail to notice $4,538,366 in expenses. Court rejected Strand Hunt's contention that the event giving rise to cumulative impact claim was a dispute with the District. Such an interpretation would render the contractual claim requirements meaningless. 93 John P. Ahlers (206)

94 Strand Hunt Court rejected quantum meruit claim as contract anticipated changes and contained provisions regarding degree and nature of changes. Court rejected Strand Hunt's contention that RCW (No-Damages Damages-For-Delay) overturned the contract provision regarding delay damages. Strand Hunt agreed to such terms and should have complied with them. 94 John P. Ahlers (206)

95 Strand Hunt Court rejected Strand Hunt's recovery of home office overhead per Eichleay formula as Strand Hunt worked continuously, and was never suspended, even though worked allegedly inefficiently. 95 John P. Ahlers (206)

96 Legislative Solution failure to submit claim notice or claim-related documentation

97 Legislative Solution party failing to provide such notice has the initial burden to make a prima facie showing that the party failing to receive such notice was not prejudiced thereby

98 Legislative Solution "prejudiced" means being deprived of the opportunity to mitigate cost, time, or both cost and time impacts