In This Issue

• County's Delay in Issuing Notice to Proceed Does Not Justify Abandonment by Contractor
• Retainage Reform Bill (H.B. 208) Gains Steam
• OSU Loses First Round on Contractor Impact Claims
• Copley Named Director

County's Delay in Issuing Notice to Proceed Does Not Justify Abandonment by Contractor

Donald W. Gregory
Construction
Law chair

A county let 16 months pass from the date of bid before issuing a Notice to Proceed. As a result, the Contractor demanded price increases and ultimately revoked its contractual obligations and sued for its lost profits.

While the Court acknowledged that there might be valid exceptions to the "no damage for delay" clause such as "delay not contemplated by the parties" or "unreasonable length of delay," the Court of Appeals overturned the trial court and denied the Contractor's recovery stating that the Contractor was not justified in abandoning the contract, but instead should have simply sought damages associated with the extraordinary delay caused by the County.

This case demonstrates the risk associated with abandoning a contract despite excessive delays caused by the owner. Daniel E. Terreri & Sons v. Mahoning Cty. Bd. of Commrs., 152 Ohio App. 3d 95 (2003).

The Court also denied the Contractor's lost profit claim for impaired bonding capacity (such as lost opportunities on other jobs), again demonstrating how difficult it is for contractors to recover such damages. Traditionally Ohio courts have been skeptical of such claims thinking that the damages from lost profits on other jobs that could not even be bid (due to a diminished bonding capacity) are too speculative to be recoverable.

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Retainage Reform Bill (H.B. 208) Gains Steam

Representative Young, Chairman of the House Commerce and Labor Committee, and others have introduced a bill that would virtually eliminate retainage on public work in Ohio as well as on private work when there is a bond in place.

Other provisions in the bill would require payment in full before a certificate of occupancy would be issued unless specific work was identified as incomplete or unsatisfactory.

Many subcontractors believe retainage is an antiquated process that simply erodes profit margins and adds to the cost of construction and emphasize that both the Ohio Department of Transportation and the Federal Government have eliminated retainage with no adverse effects.

Those with opinions on H.B. 208 should contact state legislators, particularly House members, to express their views on this important subject.

More hearings on the bill are expected soon.

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OSU Loses First Round on Contractor Impact Claims

The Ohio State University ("OSU") has faced numerous sizeable delay and impact claims arising from The Fisher College of Business (Phase II) project. One of the arguments asserted by OSU was that an owner should not be responsible for co-prime contractor delay or lack of coordination among multiple prime contractors.

The prime contractors argued that the owner should ultimately be responsible for such coordination under Ohio's statutorily mandated multiple prime system and that the impacts were caused by OSU or its agents in any event.

The Ohio Court of Claims appointed William Clark as a Special Referee to hear the matter. He tried the case over many weeks and in a lengthy opinion issued a sizeable award against OSU in favor of various prime contractors. The award will likely be hotly contested and a final decision will not be expected anytime soon.

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Copley Named Director

Congratulations to Michael F. Copley who has been elected a director of Kegler, Brown, Hill & Ritter effective October 3, 2003! Mike has been practicing law with Kegler Brown since 1999. Prior to joining the firm, he represented the United States Air Force in construction and aerospace manufacturing litigation for nearly ten years. Mike practices in Kegler Brown's construction law and litigation areas, and serves on the national mold task forces for both the Associated Builders & Contractors, and the Ceilings & Interior Systems Contractors Association. In addition, he is a captain in the United Way of Central Ohio's Young Leadership Group, and is a Lieutenant Colonel and Judge Advocate for the Ohio Air National Guard.

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Credits

Kegler, Brown, Hill & Ritter's Construction Law Newsletter is prepared by Donald W. Gregory for the Construction Law practice group.

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