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TIMELY CHANGE ORDERS WOULD HAVE UPPED SUB'S MAX PRICE

Wednesday, January 02, 2013 04:26 am

 

Change Orders -- Acceleration

In re: Central States Mechanical v. Agra Industries, Inc., 2012 U.S. Dist. Lexis 127123 (D. Kan. Sept. 7, 2012)

A sub that performed the work and then submitted a change order, "attempted to paper up the change order after the fact" and was therefore owed no compensation.

After substantial, contractor-caused delays, mechanical subcontractor Central States Mechanical, Inc. (Central) walked off the second of two biofuel plant piping projects it agreed to perform for Agra Industries, Inc. (Agra) in Iowa. A bankruptcy court granted judgment to Agra for $3 million, the costs of completing Central's work at the second plant. On appeal, Central sought upwards of $13 million, which included payment for unpaid work, extra work, and impact damages due to work acceleration. The bankruptcy court determined that Central had failed to demonstrate timely notice as to its increased costs, and a district court agreed.

The parties' subcontract anticipated delays and established a method for dealing with them: change orders. Agra was to pay Central the "cost of the work" along with a 12-percent fee, up to a guaranteed maximum price of $11.9 million, but Central could earn more through approved change orders. Central was to submit written change orders "promptly" and "prior to the commencement of such changed or revised work." The subcontract also incorporated the prime contract's terms for submitting claims, stating that any claim under that contract had to be made "in sufficient time to satisfy the requirements of the Prime Contract."

The district court agreed with the bankruptcy court that Central failed to prove that it met these timing requirements. Central countered that any effo [...]

 
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