Line Item Guarantees
Virtually everyone in the construction industry believes line items in cost-plus contracts do not constitute individual guarantees. By and large, this belief is correct. However, those provisions are often stricken and their protection should never be presumed.
Both the A102-2017 § 126.96.36.199 and the A133-2019, § 188.8.131.52 expressly provide that line items are not individual guarantees. However, owners will frequently modify or strike these provisions. It is imperative to scrutinize these provisions to ensure their protections have not been comprised. If they have been compromised, however, it is incumbent upon the contractor to either reinsert them or, alternatively, ensure that the contract has a contingency sum that is available to fund any line item overages.
The potential risk associated with individual line item guarantees can only be described as catastrophic. It is essential, therefore, to ensure the contract either contains a suitable provision or that one is added to it. We regularly draft provisions that insert such protections.
Typically, owners are responsible for coordinating their workforces with their contractors’ workforce. Likewise, contractors are responsible for coordinating the work of their various subcontractors. Nonetheless, when a lack of coordination causes problems on a job site, we are seeing increased examples of contractors taking the position that their subcontractors are responsible for coordinating their work with the work of each subcontractor impacting their work.
This frame-work is unworkable for many reasons. First, subcontractors do not have authority to control each other. Only the contractor has that control. Therefore, if one subcontractor needs exclusive access to a portion of the project occupied by another, that subcontractor cannot force the other subcontractor to leave. Second, many coordination issues are determined at the owner/contractor level. Therefore, subcontractors might not be privy to that information.
In short, most subcontractors pay little attention to the coordination clauses until a project goes sideways and the contractor is looking for someone to blame. Coordination provisions should never be ignored. We are always available to help review these provisions or any others.