Examine the answers carefully

Government contracting involves a litany of legal theories, damages issues and complex analytical problems. Rather than delving into the morass of legal complexity presented in government contracting cases, here are three common-sense questions that come up repeatedly in these types of cases.

Who is the “owner”?

On all construction projects, the question of who is the decision-maker is critical to the ultimate success of the job. On government projects, even asking this question can open a can of worms. There may be multiple agencies that use the proposed structure. Each of these agencies may have different and competing interests in the direction of the program for the design and use of the structure.

The ultimate goal of any project is to attempt to have a happy end-user while still making money on the job. The question of the “happy end-user” becomes complicated when there are so many different users with potentially competing goals and interests. A project with a well-defined planning and decision-making structure has a far greater chance of success.

Such a variety of direction can lead naturally to extensive changes over the course of the project. Changing input from end-users during construction can have a dramatic impact on the schedule and pricing of the job. You need to be vigilant on the impact and pricing of such changes and its effect on the schedule. As an electrical subcontractor, you are obviously unlikely to have significant influence on the initial design process.

You can, however, evaluate whether this process has been undertaken in a meaningful and productive way prior to bidding through your communications during the bidding phase. You also must document and protect yourself during the job. A project without careful thought to these issues is likely to become a problem project with a significantly greater chance of litigation and its resulting risks and expenses.

Should I qualify my bid?

The great majority of government jobs are competitively bid. This translates to potential fights over who has the qualifying lowest bid. Despite the development of approval lists and the potential for quality analysis of contractors in the modern era, the emphasis in the government contracting arena is still on competitive pricing.

A result of the competitive bidding process is that many subcontractors and contractors are concerned with their bids being thrown out as being non-responsive. A failure to include all elements of the project as part of the pricing may result in a competitor arguing the bid should be rejected. As such, even contractors and subcontractors that have specific misgivings often overlook these issues in submitting their bid and hope for the best during construction.

This is a dangerous practice. I have seen contractors and subcontractors submit bids without qualifications thinking they could later present a change order only to have the change order promptly rejected.

What is the bidding environment?

The potential for litigation on competitively bid public jobs is likely to be greater than other projects. Given the advantage to the low bidder, there is strong pressure for parties to underbid the job and present extensive change order and delay claims. Indeed, some general contractors seem to thrive more on change-order litigation than the base building work.

As a subcontractor, this creates a very dangerous posture. You are often stuck not only with the terms of the owner’s contract with the general contractor, but often also face highly unfavorable subcontract terms. Included in many of these contracts are “pay if paid” or “pay when paid” terms. Time extensions or delay claims may be tied into overall approvals of the owner or even outright waived as to subcontractors.

While all of these risks are present on every public job, the likelihood of highly contentious public projects appears to increase dramatically in aggressive bidding environments. When there are fewer jobs to fight over, the bidding battle gets more intense and the prices drop. You should understand the economics of what you are getting into when you bid on a public job in a competitive bidding environment.

In the public contracting arena, forewarned is forearmed. Subcontractors should have a good handle on the requirements of end-users as expressed not only in the contract documents, but also during the course of the job, to protect themselves and document potential impacts and extras. Subcontractors should be careful to protect against buying known risks by failing to articulate questions during the bidding process or failing to properly qualify bids. Finally, subcontractors should be aware not only of the risks inherent in all public jobs, but the potential for increased risk in the context of aggressive bidding environments.

HUGHES is the principal of the Northern Virginia law firm of Hughes & Associates, P.L.L.C., which specializes in construction litigation, corporate and business related representation and complex civil litigation. He may be reached at tim@hughesnassociates.com or (703) 671-8200.