Better Roads

May 2014

Better Roads Digital Magazine

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Page 23 of 31

22 May 2014 Better Roads InCourt by Brian Morrow, P.E., Esq. Attorney Brian Morrow is a partner in Newmeyer & Dillion LLP and a licensed civil engineer specializing in construction law, including road and heavy construction. C ontract provisions in most standard construc- tion industry contracts include claims and notice procedures and requirements. These provisions often require contractors seeking a time extension or reimbursement for changed conditions provide prompt notice of any alleged change. This allows the owner to gather timely information and evaluate the proposed change. The requirement that notice be promptly submitted is subject to various exceptions, including the owner's waiver of the notice provisions, reasonable compliance and actual knowledge by the owner of the changed conditions. Nonetheless, notice requirements are often strictly con- strued in the owner's favor. In the recent case of Western Surety Co. v. Department of Transportation (March 28, 2014, Georgia Court of Appeals), a claim against the Georgia Department of Transportation (DOT) based on the increased cost of materials for asphalt and petroleum products was denied based on the failure to follow the contract's notice requirements. The Georgia DOT and Bruce Albea Contracting Inc. (BAC) entered into a construction contract for work on U.S. 27. Two co-sureties, Western Surety Company and Continental Casualty Company (Sureties), issued perfor- mance and payment bonds to the DOT, as obligee. The original completion date for the project was originally March 31, 2007, but was extended to Jan. 18, 2008. During the project, BAC experienced an increase in material costs, particularly for asphalt and other petro- leum-related products. As a result, BAC suffered financial difficulties. In December 2006, BAC notified the Sureties of its financial problems. Instead of allowing the project to "grind to a halt," the Sureties provided funds to BAC from April to July of 2007. In exchange, BAC provided the Sureties with a letter from BAC to the DOT, dated April 18, 2007, stating BAC "could not perform the work and was voluntarily abandoning the Contract." The letter was re- ceived by DOT in late June 2007. After receiving the letter, the DOT placed BAC in default and directed the Sureties to take over the project. On Sept. 11, 2007, the Sureties sent two claim letters to the DOT. After a meeting, the DOT asked for more in- formation. The Sureties chose not to respond to the DOT's request and sued. The DOT moved for partial summary judgment, including on the Sureties' claims for compen- sation for price inflation incurred after March 31, 2007, and compensation for price inflation incurred before the original completion date. The trial court granted the DOT's motion, and the Sureties appealed. On appeal, the Sureties acknowledged neither BAC nor they Sureties strictly followed the claim notice require- ments set forth in the contract, particularly Section 105.13 of the specifications, which provides: Notice of Potential Claim: In any case in which the contractor believes that it will be entitled to additional compensation, the contractor shall notify the engineer in writing of its intent to claim such additional com- pensation. Such notice shall be given in order that the Department can assess the situation, make an initial deter- mination as to who is responsible and institute appropriate changes or procedures to resolve the matter. a. Claims for Delay — The Department shall have no liability for any delay, which occurred more than one week prior to the filing of such written notice. Failure of the contractor to give such written notice in a timely fashion will be grounds for denial of the claim. Put It In Writing Claims against the Georgia DOT for increased material costs are denied due to failure to comply with claim-notice requirements.

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