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Volume 8 - Number 13 | March 29, 2010

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Recent Issues

  EDITOR'S NOTES | Issue 8-13
Construction contracts usually specify a procedure for seeking final payment. The contractor is not just required to obtain final inspection and approval of the work itself. It must also submit extensive paperwork: affidavit and documentation of full payment of subcontractors and suppliers, lien waiver and releases, warranty information, record drawings, consent of surety to release final payment, etc.

The detailed nature of the final payment process raises a question. If a contractor fails to strictly comply with the application requirements, will this operate as a legal bar to payment? A Pennsylvania court recently answered in the affirmative.

The contractor acknowledged it did not submit a proper application for final payment, but alleged the owner said there would be no final payment unless the contractor dropped outstanding claims for extra work. The contractor contended that the application would have been pointless and the owner was hiding behind the technicalities of the payment clause. However, the court found its arguments baseless. Compliance with the application requirements was a condition precedent to entitlement to payment of the contract balance.

Other cases this week involve a 'referee clause' in a public works contract and the timing of a Small Business Administration size determination. The clause in question did not make the project owner's director the final arbiter of claims. It only authorized the director to respond to requests for information. And, the absence of a favorable SBA determination was not used to prematurely handicap an offeror's competitive position.
  PAYMENT APPLICATION PROCEDURE STRICTLY ENFORCED
A contractor failed to submit a complete application for final payment as required by the contract. This barred the contractor’s claim for the contract balance, extra work and delay damages.
  ‘REFEREE CLAUSE’ DID NOT MAKE PROJECT OWNER ARBITER OF CLAIMS
A ‘referee clause’ in a contract did not make the public project owner’s director the binding arbiter of disputes. It only authorized the director to resolve day-to-day questions regarding the work.
  CONTRACTOR NOT COMPETITIVE REGARDLESS OF SBA PROBLEMS
A procuring agency did not improperly consider an offeror’s problems in obtaining a favorable SBA size determination. The offeror remained in the competition for the set-aside contract and lost on the merits of its proposal.