Volume 7 - Number 40 | October 12, 2009 - Construction Claims Advisor

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You are here: Home » Volume 7 - Number 40 | October 12, 2009

Volume 7 - Number 40 | October 12, 2009

EDITOR'S NOTES | Issue 7-40: Construction contracts sometimes require submission of a sample item for inspection and approval. The item is typically custom fabricated, as opposed to a standard off-the-shelf component. The purpose of the submittal process is for the contractor to establish compliance with the specifications before proceeding with the production of numerous items. But, can the contractor actually rely on approval of the sample item?

In a case reported this week, a government agency approved a sample and a subcontractor proceeded with production of the item. The production items contained a flaw, however. Upon re-examination, the same flaw was found in the sample item. Prior approval of the sample provided no cover for the subcontractor. Inspection had been for the sole benefit and protection of the government and as such, approval could not waive or alter the specifications.

Another case reported this week involves the right of arbitrators to ignore applicable state law. The arbitrators could not act in "manifest disregard" to New York's recognition of the "total cost" method for calculating delay damages. But, they were entitled to find that the evidence didn't support the claim. This week's issue also includes a "best practices" piece on holding subcontractors and suppliers to their price quotations.

APPROVAL OF SAMPLE ITEM DID NOT WAIVE SPECIFICATION: Inspection of a sample item was for the sole benefit and protection of the government, so approval did not waive or alter a contract specification.

ARBITRATORS DID NOT IGNORE “TOTAL COST” METHOD OF CALCULATING DAMAGES: Arbitrators did not ignore state law and did not refuse to recognize the “total cost” method of calculating a claim. The subcontractor simply failed to present sufficient evidence to support its delay claim.

HOLDING SUBS AND SUPPLIERS TO THEIR PRICE QUOTATIONS: It is a challenge for contractors to hold their subcontractors and suppliers to pre-bid price quotations, but with an understanding of the elements of “promissory estoppel,” it is possible to do so.