see attachment
Case #1 A client has selected a general contractor to perform preconstruction services and to eventually enter into a negotiated contract to build a $20 million shelled office building. The construction market is very busy. Many good subcontractors are turning away opportunities to do work. The people who are now managing (office) and supervising (field) construction projects in the subcontract arena are not typically the first-team selections. During a busy market, many project engineers (PEs) are promoted to project managers, and foremen likewise to superintendents. Predict how this project could turn out if the general contractor posts the project on public plan center websites to receive open market bidding from subcontractors and suppliers. As a general contractor, it is your duty to protect the client from these risks. Question: Prepare a list of several construction laws or project management tools with explanations that you have learned linked to construction law that could be used to mitigate both the general contractor’s and the client’s risks? Case #2 In June 1993, Kombs Engineering had grown to a company with $25 million in sales. The business base consisted of two contracts with the U.S. Department of Energy (DOE), one for $15 million and one for $8 million. The remaining $2 million consisted of a variety of smaller jobs for $15,000 to $50,000 each. The larger contract with DOE was a five-year contract for $15 million per year. The contract was awarded in 1988 and was up for renewal in 1993. DOE had made it clear that, although they were very pleased with the technical performance of Kombs, the follow-on contract must go through competitive bidding by law. Marketing intelligence indicated that DOE intended to spend $10 million per year for five years on the follow-on contract with a tentative award date of October 1993. On June 21, 1993, the solicitation for proposal was received at Kombs. The technical requirements of the proposal request were not considered to be a problem for Kombs. There was no question in anyone’s mind that on technical merit alone, Kombs would win the contract. The more serious problem was that DOE required a separate section in the proposal on how Kombs would manage the $10 million/year project as well as a complete description of how the project management system at Kombs functioned. When Kombs won the original bid in 1988, there was no project management requirement. All projects at Kombs were accomplished through the traditional organizational structure. Line managers acted as project leaders. In July 1993, Kombs hired a consultant to train the entire organization in project management. The consultant also worked closely with the proposal team in responding to the DOE project management requirements. The proposal was submitted to DOE during the second week of August. In September 1993, DOE provided Kombs with a list of questions concerning its proposal. More than 95 percent of the questions involved project management. Kombs responded to all questions. In October 1993, Kombs received notification that it would not be granted the contract. During a post-award conference, DOE stated that they had no “faith” in the Kombs project management system. Kombs Engineering is no longer in business. Questions 1. What were the legal reasons for the loss of the contract and explain in detail? 2. Could it have been averted? If yes explain how? 3. Does it seem realistic that proposal evaluation committees could consider management expertise to be as important as technical ability? Case #3 A major government agency is organized to monitor government subcontractors as shown in Exhibit I. Below are the vital characteristics of certain project office team members: Project manager: Directs all project activities and acts as the information focal point for the subcontractor. Assistant project manager: Acts as chairman of the steering committee and interfaces with both in-house functional groups and contractor. Department managers: Act as members of the steering committee for any projects that utilize their resources. These slots on the steering committee must be filled by the department managers themselves, not by functional employees. Contracts officer: Authorizes all work directed by the project office to in house functional groups and to the customer, and ensures that all work requested is authorized by the contract. The contracts officer acts as the focal point for all contractor cost and contractual information. Questions 1. List at least 5 legal issues that should be considered 2. Explain how this structure should work. 3. Explain how this structure actually works. 4. What are the advantages and disadvantages of this structure? 5. Could this be used in industry? 6. What would you recommend or change? Case #4 A is an established firm specializing in a form of foundation work know as grouting, which consists of pressurized injection of a cement-based mixture into the soil underlying a building for the purpose of arresting subsidence and in some cases actually raising foundation walls. In the summer of 1990, B, a small construction firm, entered into a contract with the Brazilian Embassy to stabilize and partially reconstruct a building in the District of Columbia known as the Brazilian Annex. The annex was a relatively old building constructed in large part on filled ground. The structure had sunk on all four sides, with the result that the floors bowed in the middle. B’s task, among other things, was to stabilize the structure to prevent further sinking and to raise certain parts of the foundation, particularly the northeast corner, to partially alleviate the unevenness of the floors. This lawsuit arises from B’s decision to ask A to perform this aspect of the job using A’s grouting technique, in lieu of alternative methods available. During early August 1990, Davis, a vice president of A, and Downey, B’s president, discussed the project in a number of conferences and telephone calls. On August 14, 1990, Davis submitted a written proposal to which was annexed a standard set of conditions. The proposal, to the extent here material, made no guarantee that efforts either to stabilize or to lift the building would be successful, made no commitment as to time of completion of the job, and contemplated that the work would be billed at a per diem rate without any stated limitation on the total price of the job. After further conversations with Davis – the precise contents of which are hotly disputed – Downey sent Davis a telegram on August 25 indicating that A’s proposal was accepted subject to “verbally agreed changes” and that a signed revision would follow. The next day Downey prepared and signed an edited version of A’s written proposal to be mailed to Davis. The purport of the revision was to indicate that A was committed to stabilize the building and to lift the northeast corner by at least one and one half inches and that the job would be undertaken in approximately ten days with a maximum payment of $20,000. A never received this document or inquired as to why it had not been received as promised. Both parties proceeded on the assumption that they had come to some type of agreement, and work on the site began August 28. Although A was eventually able to stabilize the perimeter of the building, it was unable, despite protracted effort, to achieve the desired rise in the northeast corner of the building. As the work proceeded, A reported in writing daily to B, and B therefore had full knowledge that A was proceeding without marked success. At the end of eleven days of work, A billed B at the per diem rate in A’s proposal, and the work was paid for in the total amount of $9,936.75. B at no time indicated to A that is should stop working. Downey constantly reiterated, however, that B had only $20,000 to pay for the work. A never consented to the $20,000 cap and urged B to seek an adjustment in the contract price from the Brazilian Embassy, which B consistently refused to do. After approximately twenty-five days of continuous work, A concluded that it would not be possible to lift the building one and one half inches and, requiring the equipment for another job, informed B that it was terminating work. Questions: 1. What would A argue legally to support its claim? 2. What would B argue legally to support its claim? 3. Was there a contract? If so, what were its terms? 4. Suppose there were no contract. Can A recover from B for the work A performed? 5. Can B recover the payments it made? Why or Why not? 6. How could this misunderstanding have been avoided? Case #5 O and C entered into a construction contract under which C was to construct a commercial office building and receive payment of one million dollars from O. During performance, O wrongfully terminated the contract and ordered C to leave the project. C’s costs before termination were $600,000. It would have cost C an additional $600,000 to complete the work. C has been paid progress payments of $500,000. Questions 1. How much should C be able to recover from O and why? O and C entered into a construction contract under which C was to build a commercial building in accordance with plans and specifications drafted by A, as architect retained by O. The contract stated that for every day of unexcused delay, O would deduct $2,000 as a “penalty.” The contract price was $250,000. C was twenty-five days late. Questions 1. Can O recover $50,000 yes or no? and why or why not? 2. If the clause is invalid, what are O’s damages? Case #6 An arbitration statement/clause in a contract between O and C provided that the parties agree to arbitrate all disputes under this contract. C refused to perform under the contract because she claimed that O defrauded her into making the contract by telling her that he would award two other construction contracts to C when he know he had already awarded them to another contractor. C claimed that she relied on the promise by making a much lower bid than she would have ordinarily made. O denied making the promise and demanded arbitration. C refused to arbitrate and started a court action for fraud. O insists on arbitration. Questions: 1. Must this dispute be resolved by arbitration yes or no? if not how? 2. Who decides and why? Case# 7 The contract between a subcontractor and a prime contractor provided that if the owner terminated the prime contract “for any cause whatsoever at any time,” the subcontract would also be terminated and the prime contractor’s liability would be limited to payment for work done. The subcontractor partially performed but was not paid in accordance with the subcontract. Yet the subcontractor continued performing until it heard that