Construction Corner : Fall Edition

In 2010, New York State’s Department of Transportation (DOT) entered into a multi-year agreement with GC Anthony Construction Corp. to reconstruct and replace certain bridges on Route 59 in Rockland County. The work included the removal and disposal of construction debris to a DOT permitted reuse/recovery/recycling facility.

These private facilities paid for certain demo materials, such as concrete, and GC was allowed keep the sales proceeds. However, in the project’s second year, the County gave notice that all future removals would be subject its Flow Control Law. The Flow law required that demolition debris be disposed of exclusively at County owned facilities. Although it was on the books for several years, and in effect at the time Contractor signed its agreement with the DOT, it had never before been enforced—likely because the County did not previously own any disposal facilities. The Flow Law further allowed the County to charge disposal fees and required the debris to be segregated. For the GC, the Flow Law enforcement resulted in increased labor costs, lost sales revenue and unanticipated fees. 

THE LAWSUIT

GC filed a Notice of Claim with the DOT, objecting to these new requirements and alleging that the County's decision to enforce the Flow Law was a “significant” change in the scope of work which called for an adjustment of the contract fee. The DOT rejected the claim, pointing out that the contractual obligation to comply with all “applicable laws.” Regardless of lack of prior enforcement, the Flow law was in effect at the time of contract formation and thus “applicable” to the Project. 

After years of litigation, including a non-jury trial, a Court of Claims judge recently ruled that the enforcement of the Flow Control Law was a “significant change in the character of the work,” both because it deprived GC of a “commodity that could be sold and had been sold” and “the necessity to separate and transport the debris to the Rockland County facility entailed more labor” and the use of contractor’s trucks. The Court further determined that the phrase “applicable law” was ambiguous and looked to the parties’ actions to determine its actual meaning. One such “action” was the DOT’s issuance of a written objection to Rockland County shortly after Anthony Construction was notified of the Flow Law enforcement. The DOT complained to the County that, as it was a State Project, it should be immune from county laws such as the Flow Law. The Court accepted this as an admission by the DOT that, at least at the time of contract formation, it did not consider the Flow law to be an “applicable law.”

TAKEAWAYS

• Know Applicable Law: This is easier said than done - as proven by the above case. However, if you know what local laws, regulations and ordinances are on the books, you can deal with their “applicability” upfront. If both you and the Owner agree that a particular law should not apply to your scope of work, you can memorialize this agreement via an assumption, a scope exclusion, or a change to the “applicable law” section. You can also send an RFI and request clarification. Just make sure the response or resulting addendum to the bid documents is included as a final contract document. 

• Follow Contractual Claim Provisions: Too often, contractors’ legitimate claims get thrown out because of a failure to strictly comply with contractual notice provisions. That was not the case here. the GC followed the DOT’s claim procedure, filed a timely notice of claim, continued its work under protest after the claim was denied, and commenced the subsequent litigation within the statute of limitations.