Maladministration of a Construction Contract: Part 1

Maladministration Definition

A contractor has the right to enjoy least-cost performance consistent with its scope of work and compliance with the contractual specifications. Unless the contract specifies otherwise, the owner may not interfere with the contractor’s sequencing of work or methods of construction. Maladministration is an entitlement the courts recognize that allows contractors to recover costs when the owner’s actions or inactions interfere with the contractor’s work.

Maladministration rulings are often based upon the doctrine of an implied warranty that provides “an implied provision of every contract … [is] that neither party to the contract will do anything to prevent performance thereof by the other party, or that will hinder or delay [the other party] in its performance.”¹

This is the first blog post in a three-part series on maladministration claims in construction contracts. This post describes constructive change, method of performance, overzealous inspection, and third-party interference with the contractor’s work as examples of maladministration of a construction contract, and the second post discusses failure to assign work and failure to coordinate. The third post considers restriction of work hours, failure to direct the work, and additional examples of maladministration, as well as contractor’s remedies for when the owner fails to properly administer the contract.

Examples of Maladministration in Construction

Constructive Change

Maladministration may result when directions by the owner deviate from the contract and represent constructive change, and the owner does not provide an approved change order for the contractor’s increased cost and time of performance. In Rogers & Babler,² the government disapproved a contractor’s proposal to locate an aggregate plant at a certain government barrow source. As a result, the contractor was forced to obtain the aggregate commercially and to haul it to its asphalt plant. The government’s rejection of the contractor’s proposal constituted a modification of its contract to resurface asphalt roads because the contract promised that the contractor would be provided with a government barrow source and did not prohibit using the source that the contractor proposed.

The BCA decision states:

The contract documents offered to provide the contractor ‘a Government barrow source’ for asphalt aggregate. Appellant was informed during a prebid inquiry, made to the proper government official, that it could haul aggregate material to the project site from Eielson Air Force Base, where its asphalt plant was located, and appellant relied on this information in preparing its bid. There is no evidence to show that obtaining barrowed aggregate material from Eielson Air Force Base was contractually prohibited.

The government’s disapproval of appellant’s proposal to utilize and haul aggregate from its asphalt plant at Eielson Air Force Base to the project site was a change.³

The board ruled that the contractor was entitled to an adjustment for the increased cost of commercially obtaining the aggregate and hauling it to its plant for processing.

Method of Performance

As a federal board of contract appeals expressed, the general rule is that “improper imposition of a specific method of performing contract work, or improperly restricting a contractor’s choice of methods, which increases a contractor’s costs, constitutes a constructive change for which an equitable adjustment is required.”⁴

In Harold Bailey Painting Co.,⁵ a contractor chose spray painting as its method of performance, but the government objected and directed that rollers be used. The court held that in the absence of a contract provision prohibiting spray painting, the contractor could accomplish its painting work by either rolling or spraying. To require the contractor to paint by rolling is to change the appellant’s method of performance to a more expensive one. To the extent that the contractor incurred additional costs as a result of the government’s direction, it is entitled to an equitable adjustment under the “Changes” clause.

Overzealous Inspection

Overzealous inspection may constitute maladministration. In State of Texas v. Buckner Construction Co.,⁶ the contractor alleged that the state inspectors were inexperienced, were not available to perform inspections when needed, and required a higher quality of workmanship than was called for in the specifications. The contractor sued for breach of contract and delay damages based on the state’s refusal to accept the contractor’s work, which included sandblasting and painting. The trial court ruled in favor of the contractor on all issues, and the state appealed. The appellate court affirmed the lower court’s decision and held that the state’s inspectors were inexperienced and the contract did require a higher quality of workmanship and larger amount of sandblasting than was called for in the sandblasting specifications.

Third-Party Interference

Third-party interference that the owner does not prevent may represent maladministration. In Perini, Horn, Morrison-Knudsen (JV),⁷ the government was responsible for the failure of a railroad, which was not a party to the contract, to provide uninterrupted periods of rail traffic outages as promised in the contract. The promise was a warranty of site availability that was crucial to performance of the contract. The government, which was in a better position to wield influence in obtaining the promised track outages, provided no evidence to the BCA that it had attempted to do so.

The BCA decision states:

Absent the clearest of contract language, we cannot accept the view implicit in WMATA’s argument that Appellant should have anticipated and prepared its proposal based on the assumption that it might be required, at the Railroad’s whim, to mobilize and demobilize with each passing train.

The clear, affirmative and unequivocal contractual guarantees of specific outage periods were reasonably relied on by Appellant. WMATA bears responsibility for the Railroad’s disruptive denial of the outage periods provided in the contract. The warranty of site availability, crucial to any construction contract, was not subject to frustration by the third party railroad absent unequivocal, qualifying language of such an intent clearly to place on Appellant the risk of limitations on access of the nature and extent experienced in this case.⁸

The board ruled that the contractor was entitled to an adjustment for the costs of delays that resulted from the railroad’s persistent failure to provide outages and from its interruption of granted outage periods for the passage of trains.

¹     George A. Fuller Co. v. United States, 69 F. Supp. 409 (108 Ct. Cl. 1947).

²     Rogers & Babler, ASBCA 33714, 87-1 BCA ¶ 19,480 (1986).

³     Id.

⁴     Long Servs. Corp., PSBCA No. 1606, 87-3 BCA (CCH) ¶20,109 (1987) (citing Bill Wright Painting & Decorating, Inc., ASBCA No. 33,343, 87-1 BCA (CCH) ¶19,666 (1987); Otto Randolph, Inc., ASBCA No. 11,539, 66-2 BCA (CCH) ¶5928 (1966)).

⁵     ASBCA No. 27,064, 87-1 BCA (CCH) ¶19,601 (1987).

⁶     State of Texas v. Buckner Construction Co., 704 S.W.2d 837 (Text App. 1985) (rehearing denied 1986).

⁷     Perini, Horn, Morrison-Knudsen (JV), ENGBCA 4621, 87-1 BCA ¶ 19,545 (1987).

⁸     Id.

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