Delay damages on a public works project are the bane of many contractors' existence and experience in a project for a public entity. That's because the specifications for many public works projects contain a no-damages-for-delay provision. Because many contractors have little or no control over factors affecting the timing of completion of a project, contract schedules can frequently be thrown completely off track unless the contractors have planned for these potential delays in preparing their bids and readying themselves for the project.
Unfortunately, delays almost inevitably lead to cost overruns unless these considerations are planned for. A recent Ohio Supreme Court case makes clear that courts are all too ready to enforce unfair or imprudent contract provisions in favor of a public owner if the provisions are plainly worded.
In this case, the lead contractor on a building construction project on the Ohio State University campus filed suit to recover $3,400,000 in damages arising from delays in the project. The contractor claimed that the delays resulted from inaccurate and incomplete design plans and specifications. By all accounts, it appears that the plans and specifications were incomplete and were repeatedly changed during the project. Adding insult to injury, however, Ohio State not only refused to pay for the delay damages, it also deducted liquidated damages from the lead contractor's proceeds because of the delay in completion of the project. Nevertheless, the court determined that the contractor's only remedy was to seek more time in which to complete the project. The court also ruled that the contractor could not seek damages arising from delays in the project because the parties' contract explicitly barred recovery of this kind of damage.
The contractor argued that the Spearin doctrine — which permits recovery of damages in a public works project where the public owner makes affirmative representations regarding project site conditions — should apply. The Ohio Supreme Court disagreed. The court held courts cannot intervene to save a competent party from an unfair or burdensome contract obligation, a position that seems particular unfair given that contractors have little or no opportunity to negotiate the terms of a public works project.
The moral here is that, if the courts and the government won't look out for a contractor, then the prudent contractor needs to look out for itself. A contractor's bid should factor in at least some risk contingencies for delays that arise through no fault of action of the contractor. If not, a contractor can win the contract bid, but lose its shirt.