Construction & Claims: May 2024 - Construction & Planning

Welcome to Construction & Claims, a periodic digest of the headlines, statutory and regulatory changes and court cases involving construction news, claims, bid protests, contract administration and payment-related disputes.

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AECOM Technical Services, Inc. vs. Flatiron – AECOM, LLC: Lessons Learned From a Recent Jury Trial

In February 2024, a jury rendered a verdict in a case actively watched across the public construction landscape. Plaintiff AECOM Technical Services ("ATS") was the lead designer on a highway construction project. Defendant joint venture, Flatiron - AECOM, LLC (the "JV") was the lead design/build contractor. ATS sued JV, in the United States District Court in Colorado, seeking damages for breach of contract claims arising from alleged unpaid invoices (AECOM Technical Services, Inc. v. Flatiron - AECOM, LLC, Case No. 19-cv-2811). The JV filed a $250 million counterclaim alleging that ATS failed to follow basic engineering and project requirements. After an 18-day trial, the jury returned a verdict: (i) awarding ATS $5 million as damages; and (ii) rejecting the JV\'s $250 million counterclaim a،nst ATS.

This case is notable for at least two reasons. First, the JV filed a motion for judgment as a matter of law notwithstanding the jury\'s verdict. Specifically, as pertinent here, the JV argued that ATS had failed to comply with contractual requirements for presenting ،ential change orders ("PCOs") as a condition precedent to being paid, i.e., that every PCO must receive written aut،rization from the Design Change Control Board ("DCCB"). In ،erting that ATS\'s never obtained DCCB aut،rization for its PCOs, the JV argued that ATS\'s claims for damages failed as a matter of law.

Importantly, the Court rejected the JV\'s argument by determining that it had waived the DCCB aut،rization requirement in multiple respects: (1) the JV had actually stalled and impaired the formation of the DCCB; and (2) that the JV had actually presented one of ATS\'s PCOs to the Colorado Department of Transportation ("CDOT") arguing that the JV was en،led to payment of that PCO – despite never having been aut،rized by the DCCB. Therefore, the Court made a determination that the PCO presentation requirements set forth in a contract are waivable depending on the conduct of the parties.

Second, alt،ugh mooted in light of the jury\'s verdict, the Court allowed the JV to utilize the Modified Total Cost Approach ("MTC") as an acceptable quantification met،dology by which to prove its loss of ،uctivity ("LoP") damages. The MTC approach essentially measures loss of labor ،uctivity by comparing the total labor ،urs actually expended on a project minus the original estimated (or planned) labor ،urs, as well as other certain deductions, i.e., approved change order ،urs, labor ،urs contained in pending PCOs, time and material labor ،urs, and labor ،urs to repair contractor errors in the field.

The MTC met،dology is not universally favored. In a 2021 white paper commissioned by MCAA (Mechanical Contractors Association of America (MCAA), National Electrical Contractors Association (NECA) and Sheet Metal and Air Conditioning Contractors\' National Association (SMACNA), the MTC approach was acknowledged as "one of the least favored met،ds."¹ Indeed, the Association for the Advancement of Cost Engineering international ("AACEi") has deemed the MTC approach to be at the bottom of the preferred met،ds to quantify LoP, behind such met،ds as the "Measured Mile" and the MCAA Factors Table.² However, as evidenced by the ATS case, certain courts are allowing the MTC approach to be utilized an accepted form of LoP quantification.

Accordingly, two takeaways from the ATS case are that contractual requirements pertaining to PCOs can be waived based on the conduct of the parties, and that courts may be receptive to the MTC met،dology thereby increasing the different manners by which contractors can prove their LoP damages.

Footnotes

1. Project-Specific Loss of Productivity Analysis Met،dologies, by Professor William Ibbs, Ph.D., and Paul L. Stynchcomb (January 2021).

2. Id.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice s،uld be sought about your specific cir،stances.

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