October 8, 2007

EDITOR'S NOTES

A friendly debate wages about whether the construction industry has (or should have) a standard profit mark-up. Those for standardization—dominated by owners and architects—argue that it’s cost plus 10 percent. Many contractors, on the other hand, say no such standard exists; that to do business for such a low mark-up is financial suicide. Factor in the confusion that ensues with overhead markups and change orders and you’ll have hours worth of conversational fodder. This week’s first case deals with just that—a change order and the contractor’s associated overhead expenses and profit mark-ups. When additional field services come into play, the calculations get confusing and a state court must sort it out.

Also this week, we look at a contractor that withheld payment from a subcontractor for work that had been completed and approved. When it came time to pay, the contractor alleged defective work. However, the court said that without proof, the contractor must pay up.

Finally, a public agency missed its opportunity to fine a contractor for violating an anti-bid shopping statute. The agency should have assessed penalties while the work continued, not during the post-project litigation phase.

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