A recent case, Dugan & Meyers Constr. Co., Inc. v. State of Ohio Dep’t of Administrative Svcs., 162 Ohio App. 3d 491, 834 N.E.2d 1, has serious consequences for contractors. This case arose when a general contractor, Dugan & Meyers Construction Co., Inc. (“D&M”), sought to recover its contract balance and to reverse liquidated damages assessed against it in connection with building Phase II of the Ohio State University’s Fisher College of Business.
The project’s “requests for information” (“RFIs”) contained space for the issuing contractor to indicate any impacts the RFIs were expected to have on the construction schedule or project costs. Notice requirement language in D&M’s contract stated that it was required to request time extensions in writing within ten days of the delaying occurrence, otherwise all claims for extension or mitigation of liquidated damages were waived. Although D&M issued many RFIs, it attributed only 4 days of delay and no cost impacts to its RFIs.
The project became delayed and D&M submitted more RFIs, yet no requests for further time extensions were submitted. D&M was removed from part of the project when OSU concluded that D&M failed to cure various construction issues. OSU took deductions from D&M’s contract price to pay the project’s construction manager who took over for D&M. OSU also assessed liquidated damages against D&M.
The Ohio Court of Claims ruled D&M should recover the balance of its contract and that a complete reversal of the liquidated damages was warranted. D&M was also awarded delay or “cumulative impact” damages based on the Spearin doctrine (holding that contractors are not responsible for the consequences of owner-prepared plans and specification defects). The State of Ohio appealed the decision of the trial court.
The 10th Appellate District held Spearin inapplicable. The court stated that owners do not have to indemnify and hold a contractor harmless for all delays caused by agreed changes in work caused by forces outside the contractor’s control – even if a large number of RFIs were issued. The court held that the amount of RFIs alone does not prove that the plans and specs were defective. The appellate court also held that the record failed to demonstrate that the substantive concerns addressed by the RFIs rendered the plans unbuildable or inadequate to accomplish the purpose of the contract.
Despite D&M’s argument that submitting written requests for time extensions would have been futile, the court found no evidence that OSU would have refused to grant extensions. As a result, OSU was permitted to assess liquidated damages for delay.
Dugan & Meyers Constr. Co., Inc teaches a valuable lesson for those in the construction industry: a large number of RFIs alone do not prove owner-prepared plans and specs are defective. Also, contractors should pay special attention to contract notice provisions governing extensions, regardless of how likely it seems that the owner will refuse the extensions.
Donald Leach is a shareholder in the Columbus, Ohio office of Buckingham, Doolittle & Burroughs, LLP and a member of the Real Estate & Construction Practice Group.