Volume 7 - Number 50 | December 21, 2009 - Construction Claims Advisor

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You are here: Home » Volume 7 - Number 50 | December 21, 2009

Volume 7 - Number 50 | December 21, 2009

EDITOR'S NOTES | Issue 7-50: When a subcontractor completes its work, it is not unusual for unresolved disputes with the prime contractor to linger. The subcontractor may demand release of final payment, but the prime will understandably be reluctant to part with the funds when unresolved claims remain on the table. The subcontract may or may not address this situation. And in many jurisdictions, prompt payment statutes impose penalties for refusing to release final payment.

A California contractor recently faced this dilemma. A subcontractor asserted extra work claims against the contractor totaling half a million dollars. But, the sub completed its work and the public project owner paid the contractor for that work. A prompt payment statute required release of retainage to the subcontractor within seven days. Fortunately for the contractor, the statute provided a safe harbor when there was a bona fide dispute.

Other cases this week involved a contractor's right to recover against a subcontractor's performance bond and the impact of a bidder's failure to fully complete a questionnaire. The contractor lost its bond rights because it failed to declare a default and notify the subcontractor's surety. And, the bidder was disqualified because of its lack of attention to detail.

Your next issue of Construction Claims Advisor will arrive on Jan. 3, 2010. WPL Publishing wishes you a very happy holiday season and a prosperous new year.

RETAINAGE OF DISPUTED CHANGE ORDER AMOUNTS UPHELD: A prime contractor could retain 150 percent of the amount of disputed change order work from a subcontractor. An exception in a state prompt payment statute was not limited to disputes involving the base scope of work.

CONTRACTOR LOST RIGHTS AGAINST SUB’S PERFORMANCE BOND: Under the terms of a performance bond, AIA Document A311, a declaration of default and timely notice to the surety were conditions precedent to enforcing the bond.

BID DISQUALIFIED DUE TO INCOMPLETE QUESTIONNAIRE: A bidder’s failure to provide the information requested on a bidder questionnaire rendered the bid nonresponsive. The bidder could not challenge the affirmative responsibility determination of another bid.