When highway contractors neglect to give advance written notice of their intent to file a claim, they often forfeit their right to receive an adjustment in the contract sum and/or a time extension.
In limited instances, the contractor might resurrect its claim by proving that the highway department had actual notice—usually as a result of conversations between the contractor and department. The availability of actual notice as a substitute for written notice is available only in a limited number of jurisdictions, and thus it is prudent contractors keep abreast of the state of the law in all jurisdictions in which they perform work. As a case recently decided in Utah illustrates, however, it is not always easy to predict that a court will follow its own precedent.
In Meadow Valley Contractors, Inc. v. State of Utah Department of Transportation, 2011 Utah LEXIS 69 (July 12, 2011), the Utah DOT (UDOT) contracted with Meadow Valley Contractors Inc. (MVC) on an interstate highway construction project. MVC subcontracted the paving work to Southwest Asphalt Paving (Southwest). At a pre-pave meeting, UDOT informed Southwest that the specifications prohibit ribbon paving in areas where it would result in a greater-than-2-in. vertical grade separation between active traffic lanes, because the specifications do not allow traffic to traverse a vertical grade separation greater than 2 in. Ribbon paving is the most cost-effective and widely used method of paving.
Southwest disagreed, but countered that it could mitigate the greater-than-2-in. vertical grade separation by using a 5:1 taper on the vertical edges between traffic lanes and stated that this practice had been accepted by UDOT on other projects. Southwest also informed UDOT that a ban on ribbon paving would result in increased costs, production inefficiencies, and scheduling problems. UDOT refused to reverse its decision. Neither Southwest nor MVC followed up with written notice of its intent to file a claim.
At the conclusion of the project, MVC filed on Southwest’s behalf a claim seeking over $500,000 in connection with the ribbon paving issue. MVC and Southwest characterized UDOT’s directive as an erroneous interpretation of the specifications and thus a substantial change in the character of the work. When UDOT’s Board of Review denied the claim in its entirety, Southwest filed a lawsuit in MVC’s name.
UDOT defended Southwest’s claim on two principal grounds: (1) the directive was consistent with the specifications and thus no change in the work occurred; and (2) MVC failed to provide written notice as required in Section 1.7 of the standard specifications, which governs actions or directives by UDOT which the contractor considers to constitute a change in the work.
The trial court agreed with Southwest and ruled that UDOT’s insistence on alternative paving methods constituted a change in the work because the specifications did not prohibit ribbon paving. On the notice issue, the trial court followed a prior Utah Supreme Court case that seemingly recognized actual notice as a substitute for the written notice requirement in the UDOT specifications and held for the contractor. UDOT appealed.
The Utah Supreme Court disagreed that its prior decision created an “actual notice” exception in Utah. Rather, it pointed to differences between the two cases and ruled for UDOT. The prior case involved extra work UDOT ordered verbally and a contractor that filed a claim when the department later refused to pay. The contract provision at issue in both cases states that “where the contractor deems that additional compensation is due him for work or material not clearly covered in the contract or not ordered by the engineer as extra work ... the contractor shall notify the engineer in writing.” The court pointed out that when it ruled in the prior case that no written notice was required, it did so based upon the express contract language which carves out an exception for engineer-ordered extra work. In this case, the court noted, UDOT did not direct extra work, it merely interpreted the contract, albeit erroneously. The contractor was obligated to provide written notice of its intent to file a claim.
A well-trained trial judge got it wrong in this case. Contractors seeking to rely upon past court decisions concerning the availability of actual notice can similarly err, and thus all project management personnel should be trained to assume that there is never a substitute for written notice.