Maladministration of a Construction Contract: Part 2

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 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 second blog post in a three-part series on maladministration claims in construction contracts. The first 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 this 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.

Failure to Assign Work
Interference with the contractor’s ability to work may constitute maladministration. In Nelson Energy EnterPrises,² a government agency failed to assign available housing units to a contractor who was performing insulation work under a contract that guaranteed the assignment of a minimum of two units a day. The failure by the government to assign available housing units constituted interference because the failure was caused by the responsible officials’ haphazard method of determining unit availability. During a period in which 58 units were available, the officials assigned only 12.

The board’s decision states:

The method followed by the responsible inspectors in determining when such units were available for assignment was haphazard at best. We perceive no reasonable excuse for the failure of the government to discharge its obligation to assign these units as they became available, and a day in advance as admittedly required by the contract.

We conclude appellant is entitled to a price adjustment on account of the disparity between the 58 vacant units that were available for assignment and the 12 units that were actually assigned, completed, and paid for.³

Failure to Coordinate
Maladministration may result when the owner fails to coordinate multiple contractors. In Stephenson Associates, Inc.,⁴ the government was not free from responsibility for increased costs that a prime contractor caused another prime contractor to incur, despite a clause disclaiming government liability for any costs that the contractor incurred as a result of another contractor’s failure to coordinate.

The claim arose out of a contract for the phased construction of the Federal Law Enforcement Training Center (FLETC) in Brunswick, Georgia. Stephenson Associates’ contract was one of the six prime contracts that the government let for work on the FLETC firing range. Under the terms of the contract, Stephenson Associates was responsible for coordinating with other prime contractors. The government attempted to disclaim its responsibility for consequences that one prime contractor suffered as the result of another prime contractor’s failure to coordinate with the following language:

The Government shall not …be liable for any costs incurred by the Contractor by reason of [an]other contractor’s failure to coordinate or its failure to comply with directives of the Construction Manager or the Contracting Offices, it being understood and agreed that the Government does not guarantee that other contractors will not breach their obligations to coordinate their work with that of the Contractor.⁵

The BCA held, however, that “even affirmatively exculpatory language such as this does not overcome the government’s liability under the Suspension of Work clause for unreasonable delays caused by the government’s failure to coordinate the work of its prime contracts…” The BCA cited an earlier ruling from Pierce Associates, Inc.,⁶ which stated:

The Government may not give such exculpatory language precedence over the Suspension of Work clause which has been mandated by the Federal Procurement Regulations. Under the terms of its contract, the Government had the responsibility to make all reasonable efforts to keep its other contractors on schedule when the timely performance of one contractor was dependent on that of others. To allow the Government to escape the responsibility imposed upon it by the terms of the contract and to deny the Appellant the adjustment cognizable under a relief-granting clause would remove much of the Government’s incentive to properly supervise the progress of a phased construction project.⁷

As another example, an architect/engineer may be liable to the contractor for unreasonable delays in inspection and for wrongfully stopping work on a project. In Hanberry Corp. v. State Building Commission,⁸ the State Building Commission was not liable for delay that one of several prime contractors incurred because the State Building Commission had employed independent architects to supervise the progress of the work. The court ruled that the architect responsible for coordination of the prime contractors would be liable for any delay that any of the prime contractors incurred resulting from failure to coordinate.

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

²     Nelson Energy EnterPrises, ASBCA 31078, 87-1 BCA ¶ 19,599 (1987).

³     Id.

⁴     Stephenson Associates, Inc., GSBCA 6573, 86-3 BCA ¶ 19,071 (1986).

⁵     Id.

⁶     Pierce Associates, Inc., GSBCA 4163, ¶ 13,078 (1978).

⁷     Id.

⁸     390 So. 2d 277 (Miss. 1980).

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