Where action by the owner is necessary for contract performance, boards and courts have recognized the owner’s implied duties to cooperate with contractor’s and to not hinder contract performance. Most of the cases imposing this duty are decided under the doctrines of constructive change or constructive supervision of work. A contractor cannot generally recover under these theories unless he can establish that wrongful conduct or maladminstration on the part of the owner caused the problems encountered.

TYPES OF OWNER MALADMINISTRATION CASES

Various types of wrongful owner construction management conduct have been recognized as breaches of the duties to cooperate and not hinder contract performance. In many of these cases, the key issue may be whether the contractor, by making timely protest or otherwise, brought the problem to the attention of the owner so that it could be said that a change had been ordered.

One significant line of cases where the constructive change results from failure of the owner to reasonably exercise discretion granted to it by the contract. These cases deal with contract provisions requiring the contractor to obtain owner approval before pursuing a course of action or permitting deviation from the contract requirements upon obtaining owner approval. The boards and courts have read a reasonableness requirement into such approval clauses, and have found unreasonable disapproval to be a constructive change by failure to cooperate.

Such discretion is granted to the owner in a number of different areas of contract performance . In almost all cases of unreasonableness, the orders of the owner are found to be overt acts or communications that knowingly force or induce the contractor to perform in a manner desired by the owner. To be unreasonable in exercising his discretion to grant or withhold such approval, the contracting officer must deny the contractor a reasonable method of performance with no commensurate benefit to the Government. While the contracting officer may disapprove a contractor’s clearly inadequate plans, the contracting officer may not substitute his judgment for that of a contractor merely because he thinks his method of procedure superior to that proposed by the contractor.

Another area of owner discretion is the approval of proposed subcontractors. Courts have held that a constructive change occurs when an owner orders removal of a subcontractor who is performing satisfactorily. Liles Construction Company v. United States, 197 Ct. Cl. 164, 455 F.2d 527 (1972). An owner’s unreasonable failure to approve proposed component under a brand name or equal specification may also be an abuse of discretion creating a constructive change. w. G. Cornell Co. v. United States, 179 Ct. Cl. 651, 376 F .2d 299 (1967).

There are limits on the abuse of discretion theory. The owner still has a right to strict compliance with the specifications, Blake Construction Co., GSBCA
3590, 73-1 BCA ‘I 9819 (1972), where the owner takes the pain and time to describe, in detail, the manner of performance and thereby takes on the responsibility that satisfactory performance will result if the specifications are fully complied with, it has a concurrent right to prescribe the system to be used. The duty to cooperate is not a duty to make the work easier where the specifications call for performable work. Banks Construction Co. v. United States, 364 F .2d 357 (1966).

OWNER’S FAILURE TO COOPERATE

Another common constructive change for failure to cooperate occurs where the Government fails to prevent one contractor from interfering with the work of another contractor. In Hensel Phelps Construction Co., ENGBCA 3368,74-2 BCA ¶ 10,728 (1974), an earlier contractor on the site damaged a road in violation of a provision in his contract. The government’s refusal to require compliance by this contractor after protest by the later contractor was held to be a constructive change to the second contract. In Yarno & Associates, ASBCA 10257,67-1 BCA ¶ 6312 (1967), the contractor had the right to remove topsoil from an area for use in his portion of the work. The government permitted a second contractor to perform in a manner that restricted efficient use of the topsoil. This government action in the face of written notice from the contractor constituted a constructive change.

A factual pattern giving rise to a constructive change for non-cooperation is the failure of the owner to allow adequate access to the work site. In Reliance Enterprises, ASBCA 20808,76-1 BCA ¶ 11,831 (1976), the contract provided that the contractor could use an all-weather road through a security area if necessary. The failure to allow use of the road when requested was held to be a constructive change. In Cameo Bronze, Inc., GSBCA 3646, 73-2 BCA ¶ 10,135 (1973), a constructive change for a failure to provide access was denied because the contractor failed to provide notice to the government of non-access.

OWNER’S OVERZEALOUS INSPECTION

The owner may also constructively change the contract by actively interfering with the contractor’s performance of the work. This occurs most often through overzealous inspection. While the owner has his right to inspect work at any time until acceptance, he may not exercise this right in a manner that unduly interferes with the contractor’s performance. Overzealous inspection may also impact on performance’ by changing the contractor’s inspection system or significantly slowing progress.

Additional inspection procedures which have been determined to create a constructive change are confusing and vacillating inspection procedures, multiple inspections to differing standards by different officials, arbitrary refusal to perform inspections of completed work, overly close surveillance, inordinate number of visits by inspection personnel, and failure to cooperate in providing inspection when needed.

Improper performance of inspection, has also led to owner liability when it has resulted in the contractor performing to a higher standard, N. Fiorito Co. v.
United States, 416 F.2d 1284 (1969). A constructive change occurred when improperly conducted compaction test by government inspectors resulted in additional work by contractor to meet specification.

Other owner actions which have been held to constitute constructive change by interference with a contractor’s performance include: excessive noise from jet engines, diverting water into the construction site, and preventing drainage from a site. In each instance, the owner ordered continued performance despite the interference, or failed to act to alleviate the problem. Breach of an implied duty not to interfere with contract performance can also occur when the owner awards contracts or takes other actions that deprive a contractor of a material supply or labor source.

CONTACT INFO

J. Steve Holloway, GC
The Holloway Consulting Group, LLC
10885 W. Beloit Pl.
Lakewood, CO 80227
Tel: (303) 984-1941
Email: hollowayconsultinggroup@gmail.com

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