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Updated AIA Contract Documents; Subcontractor Loss of Productivity Claims

Spring 2017 Alerts and Newsletters

UPDATED AIA CONTRACT DOCUMENTS; SUBCONTRACTOR
LOSS OF PRODUCTIVITY CLAIMS

Every ten years the American Institute of Architects ("AIA") updates its industry-leading family of standard contracts for construction and design. The last set of revisions were issued in 2007. AIA is on schedule to issue updated versions of its standard documents in 2017. The first wave of contract documents will be released in late April with additional documents scheduled for release in the late summer. AIA has indicated that revisions to documents, particularly those applicable to design professionals, shall incorporate "opt-in" provisions for sustainability criteria, such as LEED certification, for many of its standard documents.

Stay tuned for further updates on the evolution of AIA documents. Verrill Dana's Construction Law Group will be planning information sessions in late summer to update owners, contractors and subcontractors on these new developments.

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GENERAL CONTRACTOR GETS HIT FOR SUBCONTRACTOR'S LOSS OF PRODUCTIVITY CLAIMS DESPITE "NO DAMAGES FOR DELAY"
PROVISION IN SUBCONTRACT

Suffolk Construction was hit an adverse verdict in connection with a subcontractor's claim for diminished labor productivity. The court awarded the subcontractor approximately $320,000 for its increased labor costs as well as about $471,000 in legal fees incurred by the subcontractor in pursuing its claims.

The subcontractor alleged that the general contractor mismanaged the project and failed to properly coordinate the trade contractors. As a result, subcontractor said it was forced to work in an unproductive, out-of-sequence fashion, and had idle crews when work was unavailable. Suffolk refused the subcontractor's requests for additional time to complete its work and instructed the subcontractor to increase staffing to meet the original completion deadline. The subcontractor increased its manpower, completed its scope of work and then pursued claims for its increased labor costs due to constructive acceleration of the work and diminished productivity of its labor forces. Following a trial, the subcontractor prevailed. The Massachusetts Court of Appeals upheld the trial court's decision.

The general contractor argued that the "no damages for delay" subcontract clause prohibited recovery of money damages associated with delays and limited the subcontractor to an extension of time for completion of its work. The Court rejected Suffolk's argument. First, the Court ruled that Suffolk could not rely on this common subcontract clause since it denied the subcontractor its sole remedy, an extension of time. In addition, the Court determined that the "no damages for delay" clause did not apply because the subcontractor was not seeking damages for "delay", but rather was seeking damages for increased crew size due to the compression of the schedule caused by the general contractor's purported mismanagement. Suffolk unsuccessfully countered that the Court ought to construe the term "delay" as set forth in the subcontract to include damages related to an idle work force.

This case will likely result in owners and prime contractors revising their contracts to specifically exclude claims for increased labor costs, loss of productivity or constructive acceleration claims. Whether or not an explicit contract prohibition on such claims will be upheld in circumstances similar to this case remains to be seen.

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