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Volume 7 - Number 15 | April 13, 2009

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Recent Issues

  EDITOR'S NOTES | Issue 7-15
Drug use among the athletically and politically talented has garnered a lot of attention over the past several years. It has cast an unflattering spotlight on baseball greats, Olympic gold medalists, big name politicians, political pundits and Hollywood’s elite. Though there is no mandatory drug testing to run for office or star in a blockbuster film, many other industries are not exempt. Even if testing is mandatory, it is fallible. That was the argument of a construction contractor that failed to enforce contract-required testing for its subcontractors. Surprisingly, the argument persuaded two courts to award a settlement to the employee who showed up for work stoned and was subsequently injured.

In this week’s second case, the contractor and Navy each used a different method to derive the price markdown caused by a deductive change order. The ASBCA accepted the contractor’s calculations, derived from the industry-accepted RS Means method. The board pointed out that the Navy’s method lacked proof and incorrectly injected a profit component.

Lastly, the addition of a "preservation of liability" clause to a standard AIA contract does not negate the contract’s reciprocal waiver of claims, says a U.S. appeals court. When a subcontractor’s defective work flooded the work site, the waiver of claims held firm.

Clarification

The Advisor recently reported an Armed Services Board of Contract Appeals ruling regarding Sundt Construction Inc. Dorothy Terrell of Smith Pachter McWhorter PLC, counsel to Sundt Construction, expressed concern that our report misstated the chronology of events.

To clarify, there were discussions between the parties regarding Sundt’s performance rating prior to the meeting that resulted in a settlement agreement. But, the purpose of that meeting was to plan project close-out. It was only subsequent to the meeting that the Air Force raised questions regarding Sundt’s warranty support and punch list completion.
  CONTRACTOR NOT LIABLE FOR BREACH OF DRUG SCREENING REQUIREMENT
A doped employee is injured on the job and then collects a settlement from the project owner’s insurer thanks to a flawed drug screening process.
  ASBCA SUBTRACTS PROFIT FROM DEDUCTIVE CREDIT
A deductive change order puts a contractor in a loss position, so the government agency cannot add a profit component to its price reduction.
  WAIVER ENFORCED DESPITE MODIFICATION TO STANDARD FORM
A contract’s reciprocal waiver of claims for insured losses bars a claim against the construction manager for damage caused by its subcontractor.