FEDERAL COURT SAYS PRIME CONTRACTOR MAY SEQUENCE WORK ANY WAY IT CHOOSES IF THE PROJECT SCHEDULE IS NOT CREATED OR PUBLISHED PRIOR TO SUBCONTRACT EXECUTION

A federal district court has ruled that a fire protection contractor could not successfully claim that a prime contractor breached the subcontract by permitting out-of-sequence work, under circumstances where the subcontract was entered into before the prime contractor developed or published a schedule for the project.

The subcontract at issue required the subcontractor to coordinate its work with that of other subcontractors and to comply with the prime contractor’s scheduling directives. After the subcontract was awarded and executed by the fire protection contractor, the prime contractor developed and published a project schedule which included input from many of the subcontractors on the project, including the fire protection contractor. The final version of the schedule was published shortly before commencement of the work, and reflected a normal sequence of work.

As work on the project progressed, the prime contractor did not adhere to the published schedule, permitting subcontractors to perform work out of the sequence shown in the schedule. As a consequence, the sprinkler contractor was forced to break through finished walls in order to set pipe sleeves, and was required repair the resulting damage at its own expense. The sprinkler contractor claimed the prime contractor had breached the subcontract by failing to follow the project schedule, and failing to have its subcontractors perform the work in a logical sequence.

The district court rejected the subcontractor’s claim, finding that the schedule at issue was not a part of the fire protection subcontract because it did not even exist at the time the subcontract was entered into. The court noted that the sprinkler contractor had bid on the project and entered into the subcontract without knowing the order in which the work would be sequenced. Rather, it relied upon its own assumptions regarding the sequence of work. This, the court concluded, was plainly contrary to its obligations under the subcontract to coordinate its work with the work of other subcontractors and to comply with the schedule directives of the prime contractor.

Note: The court’s decision in this case illustrates the difference between what the law requires and what makes sense in the real world. Of course the fire protection contractor would assume the work would be sequenced in a logical manner. Without receiving information to the contrary during the bidding process, what other basis could the contractor rely upon other than its past experience and the dictates of logic? Unfortunately, that may not be the best approach under the law, as evidenced by the result in this case. The question remains – is the court’s finding in this case the way the law should operate in such situations? The answer would seem to be no. The better approach would impose upon the prime contractor an implied duty to sequence the work in a logical manner, unless it furnishes its subcontract bidders with information, prior to the bid date, indicating an intent to deviate from that logical sequence, and the form the deviation will take. Though this approach may leave some room for dispute, it seems to make more sense for real world application than requiring subcontractors to (a) condition their bids upon later acceptance of the prime contractor’s construction schedule, (b) refuse to execute subcontracts that require cooperation with other subcontractors and compliance with the prime contractor’s scheduling directives, and (c) refrain from committing to or entering into subcontracts until the prime contractor has published an acceptable final schedule for the project. This is simply too much to ask of prime contractors and subcontractors in the real world.

Steven K. Metcalf

This Newsletter addresses recent items of interest in various areas pertaining to the construction industry. While the Newsletter may alert you to potential problems or changes in the law, it does not attempt to offer solutions, opinions, or advice concerning specific problems. Such legal advice or opinion can only be given by an attorney after careful consideration of the facts unique to a given situation. Inquiries concerning this Newsletter or its subject matter should be directed to its contributors, Steven K. Metcalf, Esq. at (918) 430-3703 or William H. Spitler, Esq. at (918) 430-3704.