Lump Sum Subcontract? Perhaps Not.

Man signing document

The trial court said “No!” based on the language in the subcontract and contract documents generally incorporated into the subcontract.

August 20, 2019
David Adelstein - Florida Construction Legal Updates

Lump sum subcontract? Perhaps not due to a recent ruling where the trial court said “No!” based on the language in the subcontract and contract documents generally incorporated into the subcontract.

This is a ruling on an interpretation of a subcontract and contract documents incorporated into the subcontract that I do not agree with and struggle to fully comprehend. The issue was whether the subcontract amount was a lump sum or subject to an audit, adjustment, and definitization based on actual costs incurred. Of course, the subcontractor (or any person in any business) is not just interested in recouping actual costs, but there needs to be a margin to cover profit and home office overhead that does not get factored into field general conditions.

In United States v. Travelers Casualty and Surety Company, 2018 WL 6571234 (M.D.Fla. 2018), a prime contractor was hired to perform work on a federal project. During the work, the Government issued the prime contractor a Modification that had a not-to-exceed value and required the prime contractor to track its costs for this Modification separate from other contract costs. In other words, based on this Modification, the prime contractor was paid its costs up to a maximum amount and the prime contractor would separately cost-code and track the costs for this work differently than other work it was performing under the prime contract.

Mr. Adelstein may be contacted at dma@kirwinnorris.com



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