EDITOR'S NOTES | Issue 5-20
publication date: May 13, 2007
Who hasn’t made an honest mistake at some point in a career? In business, some mistakes are quickly resolved. Others are not. In this week’s first case, a contractor relied on information from the developer without performing its own analysis to determine the amount of material needed to complete a siding project. Both parties severely underestimated the amount of siding needed for the fixed-price project. A state appeals court said that because the error was an honest mistake, the contractor should be compensated for the cost of the materials, despite the presence of a fixed-price contract.
An independent investigation was also not necessary for a project involving the Army Corps of Engineers. The Corps’ bid documents were not complete enough to alert the contractor to a differing site condition. Hence, the contractor merited the claim.
In the final summary, a contractor cannot expect a windfall when the court rules it was wrongfully terminated from a job. It can seek compensation for the net profit of the unperformed work, not the total sum of the unpaid portion.
This issue concludes with a look at two types of contractors—those that anticipate claims and those that simply wait for them to happen. Larry True provides a narrative of how your cost control system can help you plan for a successful claims process.
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