A party not in contract with a public project owner cannot assert a contract claim against the owner. This means a subcontractor incurring increased costs due to an act or omission of the owner must seek those costs from the prime contractor with whom the sub has a contract. The prime must then fight on two fronts, attempting to resolve the subcontractor’s claim while seeking reimbursement from the project owner.

This situation has given rise to the “pass-through” claim. The prime contractor agrees to pursue the project owner, at the prime’s expense, for the subcontractor’s increased costs. The prime will pass through the recovery, if any, to the sub. In return, the sub agrees to accept only what the prime is able to recover from the owner and otherwise hold the prime harmless.

Pass-through claims are efficient. They promote the settlement of claims and they bring all the parties together in a single forum to resolve a dispute arising out of a single set of facts and contract documents. For these reasons, they have become widely accepted. But, a recent Tennessee case is a reminder that not all jurisdictions allow a public works contractor to sponsor the claim of another party not in contract with the public owner.

Other cases this week involve responsibility for damage to a subsurface utility line and the application of a change order pricing formula in a subcontract. An excavator was responsible for the utility damage because it should have been hand digging exploratory holes in that area. And, the prime contractor could not show that a trial court ignored the stipulated pricing formula.