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A general contractor, under contract to the Brevard County School Board was required by the architect to install a more expensive fire protection system than it believed was called for by its contract. It argued that the architect misinterpreted the contract and thus required the contractor to install an upgraded system, which in essence constituted new and additional changes to the original contract.

Specifically, what was at issue was an instruction by the architect to the contractor to install an antifreeze system pursuant to the architect’s interpretation of the contract. The contractor responded that it would install the system, but under protest. No option was afforded under the contract for the contractor to suspend its work. Standard clauses of the General Conditions provided that in the event the parties were unable to agree to as to whether a change occurred, the owner would make a unilateral determination and the contractor would be required to proceed with the work. The contract also contained typical language as follows: “Failure of the parties to reach agreement regarding the cost and time of the performing the change in the Work and/or any pending protest, shall not relieve the contractor from performing the Change in the Work promptly and expeditiously.”

Although the architect issued written engineering information and directives relating to the fire protection system, and numerous field reports were transmitted with instructions to comply with these directives, the School Board failed to issue a formal change order.  The Board took the position that the upgraded system was within the scope of the original contract and specification. Ultimately, the contractor completed the project and when the owner failed to issue an equitable adjustment to its contract, the contractor sued, alleging that the School Board breached its contract by failing to issue a formal written change order as called for by the contract provisions.  A written change order  would have permitted the contractor to recover compensation for the additional work being performed.

At the trial, the county argued that the contractor had no right to recovery since it had performed the work without a change order.  Brevard County argued that the suit for this work was barred by sovereign immunity because it was outside the contract.  The trial court granted summary judgment in favor of the school board on the basis of sovereign immunity. The trial court agreed with the county and “concluded that if disputed work is not expressly part of the original contract or a change order, and it is not an implied part of the contract, sovereign immunity bars recovery for the disputed work because it is ‘outside’ the contract.”

In rejecting the trial court’s decision, the appellate court found that the essence of the dispute was whether the original contract specifications and engineering requirements encompassed the work that the contractor claims was over and above the original contract requirements. If it encompassed that work then the contractor would not be entitled to recover additional costs. But if it did not include that work, then the contractor was entitled to a change order and additional compensation. The court states: “In either event, the work involved here is not properly characterized as extra work performed ‘outside’ the contract.” Thus, the court reversed the judgment and permitted the contractor to proceed with a trial to determine on the facts whether he was entitled to compensation.

W&J Construction Corporation v. Fanning/Howey Associates, 1999 Fla. App. LEXIS 11635; 24 Fla. Law. W.D. 2002 (August 27, 1999).

Risk Management Note: It is surprising that the County would assert that a contractor could be barred by sovereign immunity from asserting a claim for compensation under these circumstances.  Had the County’s position been permitted to stand on appeal, it would have put all contractors working for this county in an untenable position concerning payment. According to the contract, they are required to continue to work when they can not reach agreement with the county as to whether work is additional  and compensable.  But by arbitrarily refusing to issue a change order for additional work, the county could use its own failure as a sword against the contractor by arguing that the lack of a change order means that the work was “outside” the contract and, therefore, barred from recovery by the doctrine of sovereign immunity. The very fact that the county would treat its contractor in this fashion should be warning to both contractors and design professionals to exercise extra caution when negotiating with counties like these.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 2, No. 2 (Feb 2000).