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City Had Duty To Seek Mayor's Approval For Contractor's Extra Costs

Wednesday, August 30, 2017 05:30 am

 

Payment

City of Atlanta v. Hogan Constr. Grp., LLC, 2017 Ga. App. Lexis 255 (June 7, 2015)

Despite agreeing to a "not to exceed" contract price, a contractor had the right to a determination---and potential approval---of additional amounts for additional work.

The Atlanta City Council authorized the mayor of the City of Atlanta (City) to contract with Hogan Construction Group, LLC (Hogan) to construct a fire station for an amount "not to exceed" $3,017,000. Two surprises occurred during performance: Both a state waterway and an electricity transmission pole were encountered at the site and required relocation of the building and a retention pond. Hogan submitted change orders for work done to accommodate these relocations, and the City paid Hogan $3,506,805. Hogan sought an additional $90,064, which the City refused to pay.

The City filed a motion for summary judgment, arguing that it had no liability to pay the additional amount Hogan sought. It cited the City of Atlanta Code of Ordinances § 2-1292 (b), which allows contract modifications whose dollar amount exceeds ten percent of the authorized "not to exceed" cost only when "approved by the city council and mayor." Here, neither the council nor the mayor had approved any change orders. However, a trial court denied the City’s motion because the fact that payment had not yet been approved "does not excuse the City from payment as a matter of law." That decision was affirmed in this appeal.

The City argued that it wasn’t obligated to pay the $90,064 because that amount hadn’t been approved. But the ordinance "does not state when the approval must take place." (Emphasis added.) Consequently, the City wasn’t relieved from its duty to pay Hogan just because the additional amount wasn’t approved either before the work was performed---or "at the precise moment[...]

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