On March 2, 2015, the Massachusetts Appeals Court affirmed a
motion for summary judgment granted to the town of Avon in an action with Celco
Construction. The dispute resulted from
a water main extension project and the rejection of a request for equitable
adjustment for differing site conditions.
Celco was the successful bidder of a contract for the extension of a water main and the reconstruction of any disturbed roadways. The bid documents required the submission of a series of unit prices for work activities that maybe encountered during construction. The project bid documents further denoted an estimated quantity of 1,000 cubic yard of rock to be excavated. A note on the bid documents gave the caveat that the 1,000 cubic yard quantity was for the purpose of bid comparison only. Celco submitted a unit price of $0.01/CY for the excavated rock in its winning bid. Celco also listed $0.01 for unit prices of other work activities.
Celco commenced construction and found that the actual quantity of rock required for excavation far exceed the 1,000 cubic yard quantity in the bid documents. Celco submitted a change request to increase the unit price of excavated rock from $0.01/CY to $220/CY. A few months later, Celco submitted another change request for $190/CY of excavated rock, calling the increased quantity of excavated material a change from the bid plans and specifications. The final total amount of rock excavated by Celco was 2,524 cubic yards. The town of Avon rejected these claims for equitable adjustment and Celco filed an action in Superior Court. The Superior Court granted the town of Avon’s motion for summary judgment.
The Appeals Court upheld the motion for summary judgment finding that Celco’s request for equitable adjustment failed to show that the type of rock encountered, and the means and methods required to excavate it, deviated in any manner from what could be anticipated in the bid documents. The court stated that in a contract which contained multiple line items of unit prices “no equitable adjustment is warranted by reason of a variation in the estimated quantities, standing alone, as compared to a deviation in the condition or character of the physical condition”. Furthermore, the court stated that if Celco had submitted a true unit cost instead of a “wholly artificial and unrealistic value of one penny, it would be in no need of adjustment to the contract price.”
The ruling should give pause to companies who bid unit price contracts by burying or sprinkling costs in some unit prices, and ignoring other as a means of driving down overall unit costs for comparison and award purposes. That strategy may win the project, but the risk of unforeseen quantities is one you own.
Celco was the successful bidder of a contract for the extension of a water main and the reconstruction of any disturbed roadways. The bid documents required the submission of a series of unit prices for work activities that maybe encountered during construction. The project bid documents further denoted an estimated quantity of 1,000 cubic yard of rock to be excavated. A note on the bid documents gave the caveat that the 1,000 cubic yard quantity was for the purpose of bid comparison only. Celco submitted a unit price of $0.01/CY for the excavated rock in its winning bid. Celco also listed $0.01 for unit prices of other work activities.
Celco commenced construction and found that the actual quantity of rock required for excavation far exceed the 1,000 cubic yard quantity in the bid documents. Celco submitted a change request to increase the unit price of excavated rock from $0.01/CY to $220/CY. A few months later, Celco submitted another change request for $190/CY of excavated rock, calling the increased quantity of excavated material a change from the bid plans and specifications. The final total amount of rock excavated by Celco was 2,524 cubic yards. The town of Avon rejected these claims for equitable adjustment and Celco filed an action in Superior Court. The Superior Court granted the town of Avon’s motion for summary judgment.
The Appeals Court upheld the motion for summary judgment finding that Celco’s request for equitable adjustment failed to show that the type of rock encountered, and the means and methods required to excavate it, deviated in any manner from what could be anticipated in the bid documents. The court stated that in a contract which contained multiple line items of unit prices “no equitable adjustment is warranted by reason of a variation in the estimated quantities, standing alone, as compared to a deviation in the condition or character of the physical condition”. Furthermore, the court stated that if Celco had submitted a true unit cost instead of a “wholly artificial and unrealistic value of one penny, it would be in no need of adjustment to the contract price.”
The ruling should give pause to companies who bid unit price contracts by burying or sprinkling costs in some unit prices, and ignoring other as a means of driving down overall unit costs for comparison and award purposes. That strategy may win the project, but the risk of unforeseen quantities is one you own.
--------------------
This is the second case summary Brendan Carter, former Law School Liaison to the ABA Forum on Construction Law, wrote for The Dispute Resolver. Thanks Brendan! He can be reached by email at bcarter@umassd.edu.
This is the second case summary Brendan Carter, former Law School Liaison to the ABA Forum on Construction Law, wrote for The Dispute Resolver. Thanks Brendan! He can be reached by email at bcarter@umassd.edu.
No comments:
Post a Comment