Prime contractors, have you ever submitted a subcontractor’s claim to a public owner? Subcontractors, have you ever wanted to submit a claim against the government, but you had no contract with the government?
Generally, if the prime has or could have at least some liability (even potentially), then the prime can “pass-thru” the sub’s claim against the government.
A pass-thru claim will fail if the prime has severed or extinguished all liability for the claim between itself and its sub. This can be done by language that may already be in the subcontract or by a later agreement of release or settlement.
But, the same subcontract with the right language or a later agreement between the prime and sub (e.g., liquidation agreement) can preserve liability to keep a pass-thru claim alive.
A short success story:
A prime contractor on a project in Slick Rock, Colorado for the U.S. Dept. of Energy agreed to remediate uranium mill tailings. The prime submitted a pass-thru claim by one of its subcontractors against the Government (the Sub’s claim “passed-thru” the Prime to the Government).
The Government’s efforts to dismiss the claim failed because the prime had to pay whatever recovery it got from the Government to the sub. Only when the recovered amount (no matter how small) was paid, by the Government to the prime and then from the prime to the sub, was the prime’s liability extinguished. Until that point, the fire of the claim kept burning.
M.K. Ferguson Co., et al. v. U.S., Ct. Fed. Claims, No. 12-57C (April 14, 2016)
Keep a Pass-Thru Claim Burning, Don’t Extinguish Liability
Prime contractors, have you ever submitted a subcontractor’s claim to a public owner? Subcontractors, have you ever wanted to submit a claim against the government, but you had no contract with government?
When You Can’t Recover from a Third-Party (The Economic Loss Doctrine)
Suppose that you (the Contractor) had extra costs and want payment for those extra costs from the designer.
Barbecue and Construction Contracts
While barbecue recipes can be short and simple, contracts can be long and complicated. Fundamentally, though, recipes are very much like contracts: what’s required, how much of each part/ingredient, in what order should they be assembled/added, when, and for how long?
Show Your Work
A mentor of mine once said that process and procedures can be more important than substance and results. Like solving a math problem, how you solve it is often more important than the answer itself. The same is true in resolving construction contract disputes with public owners.
Substandard is Not Defective
The government need not follow the industry standard. It can do less or more.
Hide, Seek, & Seek
Have you ever played hide and seek? If you are the seeker, do you win the game when you find the hidden person? Yes, of course! Unless, you’re a government contractor.
Contractor Schooled School
Have you ever done exactly what you were supposed to do, but it didn’t work and you were blamed anyway? Nevertheless, if contractors follow the owner’s plans and it still doesn’t work, the contractor may be without fault – this is as it should be.
Walk It Off, Keep Going
During a recent soccer game, my seven-year-old son took the ball squarely in the face. But, he walked it off and continued playing. Contractors must do the same with changes.
Are We There Yet?
Next time you close a deal, get the essential terms on paper and signed by all parties before it’s Miller Time.
