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.

If there is a particular subject or jurisdiction you’d like
to see covered, please let us know.

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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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