Following a trial on the merits, the Court of Federal Claims (COFC) awarded Bell $2,058,456 for "labor inefficiency costs attributable to the cumulative impact of the [series of government] changes. Bell BCI Co., v. United States, 81 Fed.Cl. 617, 619, (2008). As noted by the Federal Circuit:

"In finding for Bell, the Court of Federal Claims drew a distinction between a "delay" claim and a "disruption" for "cumulative impact" claim . . . ."

The Court then looked to the contract's "Changes" clause and determined that "[u]nless provided otherwise, the bi-lateral modifications will compensate the Contractor for the changed work, but no for the impact for the multiple change orders on the unchanged work."

Because in the court's view, Modification 93 did not "provide otherwise," the Court concluded that Bell did release its cumulative impact claims. The Federal Circuit reversed the COFC, however, the Federal Circuit examined the plain language of the release and, after determining that its terms were ambiguous, ruled that "Bell released the government from any and all liability for equitable adjustments attributable to Modification 93." The Federal Circuit then remanded the issue to the COFC to determine "which of Bell's cumulative impact claims, if any, are "attributable to" modifications other than those modifications that contain the release language discussed above.

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During the course of the project, Beco alleged that J-U-B improperly tested asphalt with the intent of promoting failed tests, unreasonably shut down the project causing delays to Beco, and unreasonably delayed the commencement of the project.  Beco alleged breach of contract, negligence, and intentional interference with contract claims against J-U-B.  Beco's breach of contract claim and negligence claims against Beco were dismissed early in the case, and the only issue on appeal was whether Beco could make a claim for intentional interference against J-U-B.

The Idaho Supreme Court reasoned that Beco could not make a claim against J-U-B for intentional interference.  In Idaho, a party cannot make a claim for intentional interference against another party to the same contract.  The cause of action is only applicable when a third party interferes with one party's contract with another.  In this case, J-U-B was acting as an agent of the City on the project because it was designated as the owner's representative and tasked with administering the general contract.  The Court reasoned that because J-U-B was the City's agent, and the actions that were the basis of Beco's claims occurred during J-U-B's administration of the contract, J-U-B was not a third party to the general contract, and therefore, Beco could not make a claim against J-U-B for intentional interference. 

The case represents the difficult task that general contractors have in making claims against the design professionals on projects.  Because the contractor does not have a contract with the design professional, it cannot allege breach of contract against the design professional.  In this case, Beco's sole remedy was to sue the City for breach of contract due to the actions caused by its agent, J-U-B. 

Court opinion:  Beco Constr. Co. v. J-U-B Engineers, Inc.

Payment Not Contingent on Owner Payment.  It is agreed that payment by Contractor to Subcontractor hereunder is not due until ten (10) days after payment has been received by Contractor from Owner, or until the passage of a reasonable time from when payment from Owner is due, whichever is sooner.  "Reasonable time" as used herein shall not exceed ninety (90) days. 

By contrast, a "Pay If Paid" clause establishes that payment by the Owner to the Contractor is a condition precedent to the Contractor's duty to pay its Subcontractors and Suppliers.  To be enforceable, the assignment of the risk of non-payment must be clear and unambiguous.  Any doubt will be construed against the prime contractor. 

Payment Contingent on Owner Payment.  It is agreed that as a condition precedent to any payment by Contractor to Subcontractor hereunder, the Contractor must first receive payment from the Owner for the work of Subcontractor for which payment is sought.  Subcontractor specifically agrees that it is relying on the Owner's credit (not the Contractor's) payment.  Subcontractor specifically accepts the risk of non‑payment by Owner. 

• "Pay If Paid" Clauses Are Not Favored By Courts Or Legislators:

The New York Court of Appeals refused to enforce a "Pay If Paid" clause on public policy grounds.  The court reached its result by noting first that the Subcontractor's lien right depended upon its contract rights and then observed that a "Pay If Paid" clause could indefinitely suspend a Subcontractor's contractual right to payment.  It, therefore, concluded that a "Pay If Paid" clause amounted to a forfeiture of the Subcontractor's lien right and will quote West Fair Electric Contractors v. Aetna Casualty & Surety Co., 666 NE 2d 967, 972 (N.Y. 1995).  Courts in California and Florida have reached similar conclusions.  Other states have addressed the conditional payment provisions by way of legislation.  Payment by an Owner to a Contractor is not allowed to be a condition precedent for payment to a Subcontractor in the states of North Carolina, Wisconsin, Maryland, Illinois and Missouri. 

• Bonding Companies May Not Be Able To Rely On The General Contractor's Pay If Paid Clause:

Bonding companies cannot enforce a subcontract's "Pay If Paid" clause and must compensate an unpaid Subcontractor when the General Contractor has not been paid by the Owner.  See Moore Brothers Co. v. Brown & Root, Inc., 207 F.3d 717 (4^th Cir. 2000) and U.S. Ex Rel. Walton Technology v. Weststar Engineering, Inc., 290 F.3d 1199 (9^th Cir. 2002).  Courts have hinted, however, that if the bonding companies insert the "Pay If Paid" language in the payment bond itself, the surety will be permitted to delay payment until the General Contractor has been paid by the Owner.  Another way for General Contractors to protect their bonding companies is to specifically refer to the payment bond surety in "Pay If Paid" clause itself.  Finally, General Contractors should include an express Miller Act or Little Miller Act (state bond claim act) waiver as part of the "Pay If Paid" provision.  Miller Act waivers are generally not valid unless they mention the Miller Act by name. 

• Prevention Doctrine

Finally, where the General Contractors' own actions or in-actions contribute to the non‑occurrence of a condition precedent, the condition precedent to pay out is deemed waived or excused - this is known as the "Prevention Doctrine."  Moore Brothers Co. v. Brown & Root, Inc., 207 F.3d 717 (2000).  The Prevention Doctrine provides that the general contractor cannot cause the non-payment to occur and then rely on that same condition as a basis not to pay its Subcontractor.  If the Owner fails to pay the general contractor because of the general contractor's own fault, the general contractor will not be able to rely on the "Pay If Paid" clause to withhold payment to the subcontractor.

Although there has been a significant amount of research conducted on scheduled overtime on constructional labor productivity, little information exists addressing the labor inefficiency associated with working a second shift.  University of Wisconsin researchers have come up with a formula and table to estimate the productivity loss of a second shift.  Their conclusion is that small amounts of well organized shift work can serve as a very effective response to schedule acceleration.  Based on the data analyzed, the researchers determined that the productivity loss and percentage shift work could be expressed as follows:

Productivity Loss = 0.22052 + 0.07152 ln (% shift work expressed as a decimal).

Figure three is a graphical representation of the equation and table four shows the productivity multiplier of shift work depending on the amount of shift work.  For example, assume the project has a budgeted man hour requirement of 30,000 hours.  Due to increased scope changes the contractor employs a second shift.  The total number of shift hours is 6,000 hours, or 20% shift work.

Inserting the 20% shift work into the formula as a decimal:

Productivity loss = 0.22052 + 0.07152 ln (0.2) = 0.1054

Multiplying the productivity loss by the total project hours spent in shift work (6,000 hours on the second shift and overlapping with 6,000 on the first shift equals 12,000 hours):

Efficiency loss = 12,000 hours x 0.1054 = 12,600 hours of productivity lost.

The equation can be used as a beginning point for negotiations between owners and contractors for adjustments due to an owner-initiated schedule acceleration and compression.  The formula also allows a contractor to select the most cost effective option (i.e., over-manning, over-time and shift work) when schedule acceleration is required.  The positive effects of shift work on productivity makes it the preferable option in place of over‑time or over‑manning.  The major source of labor inefficiency in shift work stems from overlapping the first and second shift, thus the authors recommend to overlap supervision of the two shifts by asking the supervisors of the first shift to stay longer and the supervisors of the second shift to arrive earlier.  They also recommend, if at all possible, to assign completely different tasks at different locations to the second shift workers than those of the first shift. 

Journal of Construction Engineering and Management, March 2008.  Awad S. Hanna, Impact of Shift Work on Labor Productivity for Labor Intensive Contractor.

Click here for additional labor productivity information and charts

The court held as a matter of law that the delay of a subcontractor was not a force majeure event, reasoning that a prime contractor could excuse itself from responsibility for delay simply by subcontracting the work out.  The court reasoned this interpretation would give a perverse incentive to contractors to outsource work and supplies, and would undermine an owner's reasonable entitlement to legal remedies (owners normally do not have third party beneficiary rights against subcontractors and suppliers).  On the other hand, if the general contractor remains liable for its suppliers' delays, the general contractor can transfer that liability to the supplier with whom it is in privity.  The general contractor is the party in the best position to avoid supplier delays by paying the supplier a higher price in obtaining a delay damages clause in its subcontracts.  The court held while the general contractor was not at fault in its choice of supplier, the general contractor is nevertheless responsible to the Owner for the supplier's delays when those delays are not themselves excused by a force majeure event.

Hutton Contracting Co., Inc. v. City of Coffeyville, 487 F.3d 772 (10^th Circ. 2007)

The Supreme Court reversed, and emphasized that, at most, the City's actions constituted "equivocal" evidence of waiver. "Equivocal conduct by its definition cannot be unequivocal" as required by Mike M. Johnson. Because the City on occasion expressly asserted it was not waiving its contractual defenses no juror could find the City unequivocally did the exact opposite. The Court further affirmed Mike M. Johnson and held continued settlement negotiations will not establish waiver, as such a finding would frustrate the settlement process.