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Volume 5 - Number 28 | July 9, 2007
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EDITOR'S NOTES
Depending on the perspective, project underestimates and cost overruns are necessary evils. In the first comprehensive study of its kind, researchers found that project underestimates, and therefore cost overruns, on transportation infrastructure projects occur in nine out of every 10 projects (including fixed-price projects). The problem is obviously not confined to transportation. The study reported similar findings in the aerospace, weapons, information technology, oil and gas and utility plant industries.
Even when a modest project runs over its estimate, the results can be financially debilitating for the parties involved. This week’s first case delves into problems that occur when a contractor exceeds the budget on a guaranteed maximum price project without prior approval from the owner. The project may not have run to 15 times the estimate (like the Sydney Opera House) or exceeded the budget by 12 times (like the Concorde supersonic airplane), but the principles remain the same.
The other two cases this week are wins for subcontractors trying to seek compensation by non-paying contractors. A state high court determines that a subcontractor is not limited to a mechanic’s lien when pursuing action against a contractor for an unpaid balance. And, a subcontractor may receive third-party beneficiary status on government projects in limited circumstances when certain conditions are met.
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ON THE MOVE
Find out who got hired and who got promoted in this new column. Want to see your company’s latest news here? E-mail it to editor@wpl.net.
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