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Recovery For Idled Equipment

Saturday, September 03, 2005 04:01 pm

 
Recovery For Idled Equipment

When work on an equipment-intensive project is suspended, a claim for idled equipment may arise. Project owners frequently dispute entitlement to compensation for idled equipment, arguing that the equipment could have been put to other productive use or that there had been no use for the equipment at that time even without the suspension.

Quantification of idled equipment claims is also difficult. If equipment is rented in an arms-length transaction, a daily rate can be readily established. But more often than not, the equipment is owned by the contractor or an affiliated business entity. There are a number of published guides and schedules stating the cost of owning and operating equipment. But the cost of idled equipment is, of course, much less - no fuel, no wear and tear, less maintenance.

There is little precedent regarding idled equipment claims and what there is comes primarily from the federal administrative boards. An examination of these cases does, however, shed light on the issues surrounding both entitlement to and quantification of idled equipment claims.

Entitlement

Even when the project owner is clearly responsible for a suspension of work, a contractor may not recover for idled equipment if the contractor could reasonably have put the equipment to other productive use. One project owner breached a contract by failing to obtain necessary wetland permits, causing a oneyear suspension of work. Knowing the suspension would be lengthy, the owner directed the contractor to demobilize the contractor-owned equipment from the site. The contractor complied and some of the equipment was used on other projects during the period of suspension. Although the extent of that other productive use was disputed, the contractor was denied any recovery for idled equipment. Department of Transportation v. Herbert R. Imbt, Inc., 630 A.2d 550 (Pa.Cmwlth. 1993); CCM January 1994, p. 6.

In other cases, however, it was not reasonable to expect the contractor to put idled equipment to other productive uses. This was because the period of suspended work was of uncertain duration and/or circumstances made it impracticable to remove the equipment from the site.

One project owner stopped work when it realized a change order would be nece [...]

 
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