Surety Bond Quarterly - Summer 2015 - 35

compete for the available labor. As a
result of not doing their homework
adequately, contractors may then
take every opportunity to prepare
change order requests or file claims
to make up for their bid errors.
Bidding below costs
and over optimism
This practice would be considered a
deliberate underbid, presumably justified to break into a new geographic
market or new line of work. After the
euphoria of winning the job disappears and the reality of losing big
money on the project sinks in, contractors may be persuaded to seek
every opportunity to submit requests
for change orders or file claims.

by putting higher progress payment
weighting factors (than could be justified on a balanced cost basis) on
work performed early in the project
to the detriment of work performed
later in the project. Another approach
might be submitting a higher percentage completion estimate in its
pay requests for easier work, such as
installing straight run pipe, and then
experiencing lower productivity and
higher unit costs for valve stations or
small bore pipe installations, which
are more difficult to install. If these
attempts at cost recovery fail, the
contractor may look for other opportunities to file a claim to recover its
increased costs.

Brokering the work and
passing all problems to the
subcontractors without
adequate coordination
General contractors or large engineering, procurement, and constructor
(EPC) contractors often subcontract
all of the work but fail to adequately
schedule and coordinate the work of
the various trades. The general contractor or EPC contractor then points to
the clause that it inserts in its subcontracts stating that the subcontractor
must coordinate and cooperate with
the other trade subcontractors. These
problems often result in claims by the
subcontractors that are impacted by
the main contractor's failure to perform its coordination duties.

Failure to provide notice
of delay, changes, or other
impacting events
The contract often identifies situations
for which the contractor is required to
provide notice to the owner if delay or
increased costs occur. These events
include, but may not be limited to,
force majeure events, changes in
scope, differing site conditions, failure
on the part of the owner to respond
to requests for information in a timely
manner, late owner approvals, and
interference by other contractors.
When the contractor fails to provide
timely notice, the owner may reject a
request for time extension, a proposed
change order, or a claim for increased
costs because the owner has lost the
opportunity to mitigate the problem.

Unbalanced bidding resulting
from manipulating unit prices
and front-end loading progress
payment weighting factors
Contractors often gamble by proposing high unit prices on types
of work where they anticipate significant growth from the owner's
bid quantities and lower prices on
types of work where they feel that
they need to be competitive. If these
tactics prove to be ill advised, or if
the contractor guesses incorrectly
on which units will grow, the contractor may not be recovering its actual
costs. In addition, contractors will try
to get ahead on the cash flow curve

Failure to follow
authorized means and
methods and procedures
Often, the contractor is free to use
its preferred means and methods
and procedures for performing the
construction work. However, the
owner's specifications often require
more expensive and time-consuming
means and methods and procedures
for performing the work than recognized by the contractor when preparing its bid. When the owner rejects
the contractor's work method and
insists on the specified means and
methods and procedures, the contractor may attempt to file a claim.

Refusal to proceed with
directed work pending a
contract modification
Owners often disagree with the contractor's price for performing changed
work but still want the work performed.
To overcome this problem, contract
provisions are often included to give
the owner the right to make a unilateral
change. If the contractor is experiencing cash-flow problems or potential
delays in completing the work, it may
choose to play hardball with respect
to forcing the owner to formalize the
change and agree to its price and time
extension request before performing
the changed work. When the work is
eventually performed, the actual cost
may be much higher than it would have
been had the work been performed
when the change was identified. These
situations are ripe for claims.
Performing defective work
Owners may need to withhold progress payments from contractors
that have performed defective work.
The delay to the project completion
caused by the time required to correct these defects may also justify the
owner's liquidated damages claims.
The cost of correcting defective work
is most certainly included in the owner's counterclaims.
Hopefully, the identification of these
problems will alert the contractor's
management and help to avoid the
need to file claims and allow for a more
successful project. Surety professionals should consider reminding their
contractors of these problems and
strategies for claims prevention. ●
Richard J. Long, P.E., is Founder and
CEO of Long International, Inc. Long
has more than 40 years of U.S. and
international engineering, construction, and management consulting
experience involving construction
contract disputes analysis and resolution, arbitration and litigation support and expert testimony, project
management, engineering and construction management, cost and
schedule control, and process engineering. He can be contacted at
rlong@long-intl.com and 303.972.2443.

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

35


http://WWW.NASBP.ORG

Table of Contents for the Digital Edition of Surety Bond Quarterly - Summer 2015

NASBP Upcoming Meetings & Events
2015-2016 NASBP Executive Committee
From the CEO - There is Poetry in Surety Claims, Surely
Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Profile: President Susan Hecker
Developing Your Leadership Vision
Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
An Introduction to Probate Bonds
Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
The AIA Describes Updated and Expanded Design-Build Documents Family
Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover1
Surety Bond Quarterly - Summer 2015 - cover2
Surety Bond Quarterly - Summer 2015 - 3
Surety Bond Quarterly - Summer 2015 - 4
Surety Bond Quarterly - Summer 2015 - 5
Surety Bond Quarterly - Summer 2015 - 6
Surety Bond Quarterly - Summer 2015 - 2015-2016 NASBP Executive Committee
Surety Bond Quarterly - Summer 2015 - From the CEO - There is Poetry in Surety Claims, Surely
Surety Bond Quarterly - Summer 2015 - 9
Surety Bond Quarterly - Summer 2015 - Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Surety Bond Quarterly - Summer 2015 - 11
Surety Bond Quarterly - Summer 2015 - Profile: President Susan Hecker
Surety Bond Quarterly - Summer 2015 - 13
Surety Bond Quarterly - Summer 2015 - Developing Your Leadership Vision
Surety Bond Quarterly - Summer 2015 - 15
Surety Bond Quarterly - Summer 2015 - Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
Surety Bond Quarterly - Summer 2015 - 17
Surety Bond Quarterly - Summer 2015 - 18
Surety Bond Quarterly - Summer 2015 - 19
Surety Bond Quarterly - Summer 2015 - 20
Surety Bond Quarterly - Summer 2015 - 21
Surety Bond Quarterly - Summer 2015 - An Introduction to Probate Bonds
Surety Bond Quarterly - Summer 2015 - 23
Surety Bond Quarterly - Summer 2015 - 24
Surety Bond Quarterly - Summer 2015 - 25
Surety Bond Quarterly - Summer 2015 - 26
Surety Bond Quarterly - Summer 2015 - Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
Surety Bond Quarterly - Summer 2015 - 28
Surety Bond Quarterly - Summer 2015 - 29
Surety Bond Quarterly - Summer 2015 - NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
Surety Bond Quarterly - Summer 2015 - 31
Surety Bond Quarterly - Summer 2015 - The AIA Describes Updated and Expanded Design-Build Documents Family
Surety Bond Quarterly - Summer 2015 - 33
Surety Bond Quarterly - Summer 2015 - Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
Surety Bond Quarterly - Summer 2015 - 35
Surety Bond Quarterly - Summer 2015 - NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Surety Bond Quarterly - Summer 2015 - 37
Surety Bond Quarterly - Summer 2015 - Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover3
Surety Bond Quarterly - Summer 2015 - cover4
Surety Bond Quarterly - Summer 2015 - outsert1
Surety Bond Quarterly - Summer 2015 - outsert2
Surety Bond Quarterly - Summer 2015 - 43
Surety Bond Quarterly - Summer 2015 - 44
https://www.nxtbook.com/naylor/SBPQ/SBPQ0118
https://www.nxtbook.com/naylor/SBPQ/SBPQ0417
https://www.nxtbook.com/naylor/SBPQ/SBPQ0317
https://www.nxtbook.com/naylor/SBPQ/SBPQ0217
https://www.nxtbook.com/naylor/SBPQ/SBPQ0117
https://www.nxtbook.com/naylor/SBPQ/SBPQ0416
https://www.nxtbook.com/naylor/SBPQ/SBPQ0316
https://www.nxtbook.com/naylor/SBPQ/SBPQ0216
https://www.nxtbook.com/naylor/SBPQ/SBPQ0116
https://www.nxtbook.com/naylor/SBPQ/SBPQ0415
https://www.nxtbook.com/naylor/SBPQ/SBPQ0315
https://www.nxtbook.com/naylor/SBPQ/SBPQ0215
https://www.nxtbook.com/naylor/SBPQ/SBPQ0115
https://www.nxtbook.com/naylor/SBPQ/SBPQ0414
https://www.nxtbook.com/naylor/SBPQ/SBPQ0314
https://www.nxtbook.com/naylor/SBPQ/SBPQ0214
https://www.nxtbookmedia.com