Construction disputes are common in the contracting industry. There are many potential pitfalls when building anything new, but contracting agencies understand this and have policies to protect their interests. Contractors must understand these policies and their implications so they can avoid causing future problems through their actions or inaction. Building something new is inherently risky and contracting parties must be aware of these risks before entering into a contract. Contracting officers and contracting managers are well versed in common contracting disputes and how to mitigate them. Contractors should be aware of these risks and take proactive steps to protect themselves from being held liable for any construction-related disputes in the future.

Termination for cause

One of the most common contracting disputes is a termination for cause. Contracting officers will terminate a contract for cause if one or more of the following conditions are present:

  • A contractor fails to perform their contractual obligations

  • A contractor fails to comply with contractual obligations

  • A contractor breaches a material contract term or condition

Contractors must be aware that their performance must be in good faith and in accordance with the contract documents. Contractors must be diligent in their performance of their contractual obligations, especially if they are responsible for more than one contract. There are various ways contractors can comply with good faith and good performance. Contractors must diligently follow the contract documents and follow industry standards in their work.

Sub-contingencies

A sub-contingency occurs when the contracting officer or other government official makes an award to a contractor who fails to perform their contractual obligations. In such situations, the contracting officer will issue a performance-based (contingency) award to the contractor with a sub-contingency if the contractor fails to perform their obligations and the government incurs additional costs.A sub-contingency award is not a termination for cause but rather an incentive to comply with the contract and improve performance. The sub-contingency is a fixed fee that is payable only if the contractor fails to perform. If the contractor performs their obligations satisfactorily, the contractor will not be required to pay the sub-contingency fee.

Change orders

Change orders are one of the most common types of contracting disputes. Contractors are typically awarded a lump-sum contract for a fixed price. Contractors may request a change order at any time for unanticipated work or changes to the scope of work.Change orders are used to accommodate unforeseen circumstances during construction. Contractors need to be diligent when documenting the need for a change order and the amount of the change order. There are two common types of change orders - direct change order and cost-reimbursement change order.Direct change orders occur when a contractor performs work that is not part of the original scope of work but is necessary to complete the project. A direct change order is awarded for the cost of the work plus any profit margin.

Change in work

A change in work occurs when a contractor performs work that is not part of the original scope of work but is necessary to complete the project. For example, a contractor may be awarded a contract to renovate an old building but instead of renovating the interior of the building, the contractor decides to demolish the interior and construct a new one. A change in work award is given to the contractor as a form of compensation for the additional work.Change in work is also referred to as a changed-conditions clause. In such cases, the contractor must comply with the contract’s changed-conditions notice and reporting requirements.

Disputed costs

Disputed costs occur when a contractor submits a change order request for work that is not required by the contract. For example, a contractor may request a change order for additional work that is not required by the contract but is necessary to complete the project. If the contracting officer approves the change order, the contractor is awarded additional money for the work.A contracting officer may also reject a change order request for work that is not required by the contract. If the contracting officer rejects the request, the contractor is liable for the additional costs.

Mistaken identity

Mistaken identity occurs when the government mistakenly incurs costs due to an individual who is not authorized to enter a contractual relationship with the government.For example, a contractor may perform work on a government-owned facility but the government mistakenly believes that the contractor is an employee. The contractor may perform work that is not authorized by the government. This type of contracting dispute may be resolved by a mistake in identity.However, contractors should be careful not to engage in work that is outside their contractual scope of work. Contractors may incur additional costs if they engage in work that is outside their contractual scope of work.

Conclusion

Construction is inherently risky and contracting parties need to understand the risks and take proactive measures to protect themselves from future contracting disputes. Contracting officers and contracting managers are well versed in common contracting disputes and have policies to mitigate them. Contractors must understand these policies and their implications so they can avoid causing future problems through their actions or inaction.