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Volume 7 - Number 12 | March 23, 2009

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  EDITOR'S NOTES | Issue 7-12
This year, the Washington Metro Area Transit Authority, or WMATA, celebrates the 40th anniversary since it broke ground on the interstate commuter rail system that transports an estimated 215 million riders each year in the greater Washington, D.C., area. It is the second largest rail transit system in the country and operates five rail lines and 86 Metro stations. The 106.3-mile system, funded by ride fares and federal, state and local tax dollars, has been in some state of construction, improvement, repair or debate ever since it collected its first fares in 1976. Today, WMATA is moving forward to set down 23 additional miles of track for a sixth line, the silver line, which will connect the main network of transit lines to Dulles International Airport in Chantilly, Va. That addition is slated for completion in 2015. A proposed brown line will use existing lines for faster transport between hub stations within the District.

With a rail system in constant need of repair and improvements, construction claims come as no surprise. This week’s first case deals with a unit-priced contract on the WMATA rail system. The joint-venture contractors removed more than double the amount of track estimated in the contract. WMATA acknowledged the inaccurate estimate and additional work but did not pay for any of it. The Board of Contract Appeals determined that the contractors were entitled to the payment based on the contractually mandated unit prices. But, because the contractors did not offer evidence to prove increased performance costs for the overrun, they could not recuperate those additional expenses.

In the second case, a state’s statutory discovery rule goes head to head with a limitation period defined in an AIA contract for a home construction project. Water and mold damage discovered five years after project completion falls just outside of the four-year limitation period.

With the April 15 income tax filing deadline just around the corner, taxes are on the minds of most Americans. The final case in this issue considers how taxes can affect a fixed-price contract. The rules that govern contract price increases when taxes increase mid-project are determined based on the government entity that generates the increase. The lesson learned here is that it pays (literally) to know about local tax rates and proposed increases.
  CONTRACTOR PAID FOR QUANTITY OVERRUN AT CONTRACT UNIT PRICE
Without submitting an equitable price adjustment to prove increased performance costs on a significant quantity overrun, a contractor can only collect the contractual unit price for the extra work.
  AIA CLAUSE CONTROLLED COMMENCEMENT OF LIMITATION PERIOD
A state’s discovery rule cannot be applied to a statutory limitation period spelled out in an AIA contract. Construction defects found after the period has expired are not protected by the discovery rule and therefore time-barred.
  CONTRACTOR DENIED RECOVERY FOR TAX INCREASE EFFECTIVE AFTER CONTRACT AWARD
Price protections and considerations from increased state, local and tribal taxes are not the same as those given for federally imposed taxes on fixed-price contracts.