• This Job is Taking Forver!
  • June 3, 2003
  • Law Firm: Hodes, Ulman, Pessin & Katz, P.A. - Towson Office
  • A recent case from Maryland's Court of Special Appeals will have a significant impact upon public construction projects. The author of this article was the attorney for the contractor in that case, and here comments on the implications for school construction. In 1995, Baltimore City Public Schools ("BCPS") issued a contract for renovations to several science labs at Baltimore's Polytechnic High School (the "School"). Part of that work entailed the replacement of certain utility lines located beneath one of the labs. However, in the early stages of the job, the BCPS and the contractor discovered that contrary to indications on the architect's drawings, there was no hollow crawlspace which contained those utility lines. Instead, the lines were encased in solid concrete. As a result the contractor was not able to simply core drill into the crawlspace so as to replace the lines. Rather, the contractor was forced to demolish the concrete floor, purchase a new type of line which could be submerged in concrete, and then repour the concrete floor. Unfortunately, when the floor was disturbed, so were the tiles which covered the floor. Those tiles turned out to be asbestos containing, and therefore had to be abated. Added to the problem was that the architect had neglected to include in its design pipe chases to service the bunsen burners. The job, which was originally to be completed in &under;&under; days, was ultimately extended for an additional &under;&under;. When BCPS refused to compensate the contractor for any of the delays, the contractor brought suit. In its complaint, the contractor sought compensation for, among other things, field costs and home office overhead costs. Field costs are those costs incurred by the contractor at the job, and are typically comprised of the contractor's trailer, port-a-pot, superintendent, phone, etc. Home office overhead costs, on the other hand, are those costs which the contractor incurs at its office, and are typically, its officer and secretarial salaries, mortgage or rental, insurance, etc. Home office costs, moreover, can be traced to a particular construction job by means of a mathematical formula devised by the Armed Services Board of Contract Appeals in the case of Eichleay, Inc.. The formula, quite naturally, became known as the Eichleay Formula. In the Poly matter, the trial court awarded approximately six months of field delay costs, but the contractor appealed seeking an award of home office costs. The decision issued by the Court of Special Appeals was not appealed further by BCPS and is, therefore, the law in the State of Maryland. The resulting case, Gladwynne Construction Co. v. Mayor and City Council of Baltimore, CITE, recognized for the first time in Maryland a contractor's right to home office overhead costs pursuant to the Eichleay Formula for owner caused delay. What does that mean for school construction? Quite simply, in those situations where the contractor has been delayed without fault, it will be entitled to recover home office costs if the following conditions are met. First, it must show that it was not able to absorb its overhead on another project either because of the uncertainty of the delay period or because of the contractor's limited bonding capacity. Second, it must show that its work was put on standby by virtue of the delay. That is not to say that the job must come to a complete stop. Rather, the delay must be such that the contractor is only able to accomplish a minimal amount or type of work. If these conditions are satisfied, the amount of money which the contractor can recover depends only upon the percentage of its overhead which was being covered by the delayed job. In other words, the fewer jobs that contractor had at the time, the greater the recovery. What are the options for a School Board? There are several options -- all good. First, the School Board can, by careful contract drafting, eliminate entirely the contractor's right to recover delay damages. Second, in the absence of such a contract provision, the Board can, and should, negotiate and limit, delay costs at the time of the delay. Last, the Board can, in the event of a significant delay, suspend the work (if the contract so provides), or put the contractor to work in some other area so that there can be no finding of "standby."