Volume 5 - Number 40 | October 8, 2007 - Construction Claims Advisor

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You are here: Home » Volume 5 - Number 40 | October 8, 2007

Volume 5 - Number 40 | October 8, 2007

EDITOR'S NOTES | Issue 5-40: A friendly debate wages about whether the construction industry has (or should have) a standard profit mark-up. Those for standardization—dominated by owners and architects—argue that it’s cost plus 10 percent. Many contractors, on the other hand, say no such standard exists; that to do business for such a low mark-up is financial suicide. Factor in the confusion that ensues with overhead markups and change orders and you’ll have hours worth of conversational fodder. This week’s first case deals with just that—a change order and the contractor’s associated overhead expenses and profit mark-ups. When additional field services come into play, the calculations get confusing and a state court must sort it out.

CHANGE ORDER MARK-UP FOR OVERHEAD COVERED EXTENDED FIELD COSTS: Intricate calculations between a city and contractor for overhead and profit mark-ups on a change order prove that costs for extended field services were covered. They do not merit separate consideration.

PRIME NOT ALLOWED TO WITHHOLD PAYMENT ON APPROVED SUBCONTACTOR APPLICATIONS: A contractor approves a subcontractor’s work, then tries to rescind its approval, alleging defective work and unearned allowance, to justify withholding payment. Without supported proof of defect, a New York court rejects the tactic.

ANTI-BID SHOPPING PENALTIES CANNOT BE IMPOSED BY COURTS: Penalties for violating an anti-bid shopping statute cannot be applied retroactively, rules a California court. A public agency must assess the penalties against the contractor during the construction phase, not after the fact as a form of civil damages.