October 10, 2007

Delays on a public works project are the bane of many contractors' existence in a project for a public entity. That's because the contracts for such projects often contain a "no damages for delay" clause.

Even though the strict application of such clauses can be unfair, a recent ruling by the Ohio Supreme Court makes clear that they will be enforced anyway if the provisions are plainly worded.

In the Ohio 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. The court determined that because of the "no damages for delay" clause in the contract, the contractor's only remedy was to seek more time in which to complete the project.

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 lesson here is that, if the courts and the government won't look out for a contractor, then the 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 its own. If not, a contractor can win the contract bid, but lose its shirt.

Citation for lawyers: Dugan & Meyers Constr. Co. Inc. v. Ohio Dep't of Admin. Services, 864 N.E.2d 68 (Ohio App. 2007).