Construction Claims: Cost Overruns and Delay Claims

Construction contract bidding is a complex process

Contract bidding is a complex process that requires owners and contractors to provide detailed information about a project. It is necessary in order to reasonably estimate the costs associated with building projects. Though detailed information and careful consideration may have been involved in the bidding process, inevitable changes made after contracts have been signed can result in significant differences between project bids and project costs.

Circumstances unforeseen prior to the start of a project can have significant negative financial impact on contractors, sub-contractors, and owners. At the DiJulio Law Group, we have an in-depth understanding of complex issues associated with documenting, proving and recovering the costs associated with changes to a contractor’s performance resulting from a variety of factors.

Construction cost overruns

Most construction projects benefit from a modicum of planning, but circumstances occur that cause some projects to go astray which make cost overruns inevitable. Contractors and sub-contractors must stay ahead of the project by acknowledging problems immediately and providing solutions. Informing owners is in the best interests of contractors as well.

A useful process in cost management of a project is to compare the budgeted/estimated project compares with the completed actual project. Reasons for cost overruns can quickly be determined by this method. Once the project is completely finished, and the project costs are paid, a project completion meeting with significant individuals of the project team to discuss what went right and what went wrong is highly recommended.

Our experience includes all types of construction cost overrun claims, such as impact and delay claims, changed conditions or differing site conditions claims, and defective specification claims. We use an well informed, in depth approach in resolving our clients’ disputes.

Construction delay claims

As a construction delays can create major problems and become very costly, the schedule is a critical part of any construction project. Careful scheduling can help protect the interests of contractors and property owners, but there may be unforeseen circumstances or events that give rise to construction delay issues.

These delay issues may cause any number of construction disputes. Effectively managing these disputes often requires seasoned legal judgment. Such judgment comes as a result of having protected the interests of contractors, sub-contractors, and owners with respect to a wide variety of delay-related issue such as weather, concurrent, or owner-caused delays.

DiJulio Law Group

A Contractor’s Right to Lien Real Property

If the homeowner fails to pay the contractor

California law gives every contractor and supplier the right to lien real property for labor and material they’ve incorporated into a property, but for which they haven’t been paid. For example, let’s say a homeowner hires a contractor to build a deck and the contractor then hires a subcontractor with employees to pour concrete footings for the project. If the homeowner fails to pay the contractor, that contractor can put a lien on the homeowner’s house. This sequence of events is logical and fair.

Seemingly less logical is the subcontractor’s ability to place a lien on the homeowner’s property. This can happen in a situation where the homeowner pays the contractor, but that same contractor fails to pay the subcontractor for the concrete work related to the project. Under law, a general contractor is not only the employer of its subcontractors, but also the subcontractor’s employees. The employees of the subcontractor may then seek redress from the homeowner instead of the contractor. Since the homeowner’s house is collateral against all transactions, it’s his house that gets a lien put against it. This is true even if the homeowner paid someone else for that labor and materials.

A homeowner could be legally responsible to pay the contractor twice

In a worst case scenario, a homeowner could be legally responsible to pay twice for labor and supplies. This could happen if a homeowner were to hire and, under the terms of the agreement, pay a general contractor for a project. If and when the contractor fails to pay his crew or his suppliers, the homeowner could be legally obligated to pay for the supplies and wages himself. A foreclosure on a lien could force him to sell his house to pay the debt. The homeowner could, of course sue for recovery of the losses the contractor.

Contracts quite often employ the use of progress payments. Prime or general contractors must in turn make progress payments to subcontractors within 10 days of receipt of the funds from the home owner unless there is a written modification to this rule. If the prime contractor fails to pay, he may be subject to a levy.

DiJulio Law Group