Following the construction industry and related legal topics in the United States.


Monday, February 26, 2007

Good News for Owners Worried About the Rising Tide of Construction Costs

While there is always the opportunity for a contractor to argue for extra compensation due to an unintended assumption of drastic price changes in the market , as noted at http://www.constructionchannel.net/Cases_Feb2007.html. In the case of In re Spindler Constr. Corp., ASBCA No. 55007 (2006), the Armed Services Board of Contract Appeals did not, under the facts of this case, find the increase in steel prices- albeit a 23 percent increase- to make the performance of the subcontract commercially impracticable. The subcontract price overrun considered in the context of the whole of the subcontract price was only five percent. Neither the prime contract nor the subcontract contained a price adjustment clause for material cost changes. Furthermore, because the steel subcontract was a fixed-price contract, the subcontractor bore the risk of market fluctuations. A contractor asserting commercial impracticability must show that a supervening event made performance impracticable. Here, the supervening fluctuation in the steel price was not found to make performance impracticable. (This entry was published by John Springer of Womble Carlyle's construction and real estate development group.)

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