In cases involving the GSA, contractors totally prevail 38% of
the time and received at least partial satisfaction in nine out
of 13 cases.
Infrastructure-related disputes are unlikely to be resolved in
favor of contractors. It is not clear whether this is due to the
nature of infrastructure project-related disputes or because
these projects are often governed by the Army Corps of
Engineers. In the 14 cases involving infrastructure projects
in the collection of legal cases, the appellant/contractor completely prevailed only once and partially prevailed on only
two other occasions.
Perhaps counterintuitively, design-build has no advantage
over design-bid-build in terms of producing better legal outcomes for contractors. Among the 25 cases in the database
that involved design-build construction service delivery, the
appellant/contractor prevailed at least partially 32% of the
time. Among the 74 design-bid-build projects in the database, the appellant/contractor prevailed at least partially
45% of the time.
This is surprising since disputes often arise due to lack of
adequate and appropriate communication between the
parties. Design-build involves significant upfront communication to plan projects and to reach consensus on specifications and other key issues. However, in the vast majority of
cases, the cause of the dispute arises during the project and is
typically unforeseen by either party. Correspondingly, upfront
engagement between the parties represents an imperfect
defense against the emergence of disputes.
Specifications frequently represent the main source of conten-
tion. Many of the disputes center upon misunderstandings
regarding specifications. To the extent that agencies are
deemed to be at fault, the reason often revolves around a
change in specifications that is either not properly articulated/
communicated or that requires some level of countervailing
financial consideration that is not offered.
By far, the most common cause for dispute was the denial
of a cost adjustment due to an unforeseen problem or issue
that arose over the course of the project. Again, with many
disputes arising during the course of performance, design-build possesses little advantage over design-bid-build in
terms of preempting legal disagreements.
The frequency of lawsuits seems to increase in the midst of
a recessionary economic environment. One might expect
that people would battle most intensely for resources during
those moments in economic history when resources are most
scarce. Correspondingly, 18 of the 107 cases were decided
in 2001 (the recession of 2001 began in March of that year).
Ten of the cases took place in 2008, a year fully engulfed by
the Great Recession. No other year produced nearly as many
cases in the collection. Given the federal budget’s financial
situation, however, it is conceivable that disputes will become
more frequent between agencies and contractors going forward irrespective of the state of the economy.
The claims of appellants/contractors were most likely to be
denied due to a lack of evidence. The implication is that
when contractors work with government agencies, persistent documentation is essential. This may seem obvious, but
our review of cases indicates that many construction firms
lose their appeals because of a lack of adequate evidence
regarding the basis of their claims/defenses. n
Total Cases Including
Original Contract Value
Requested Damages as
Percentage of Original
Appellant 17 13 $6,322,395 $294,531 4.7%
Split (favors Appellant) 21 18 $11,730,212 $746,101 6.4%
Mixed 9 9 $12,017,931 $487,341 4.1%
Split (favors Respondent) 7 5 $16,222,223 $5,847,511 36.0%
Respondent 53 47 $18,350,724 $795,984 4.3%
Total/Average 107 92 $14,620,559 $1,011,037 6.9%
Exhibit E1: Distribution of Revised Court Decisions with Corresponding
Average Contract Amount & Damages Sought
Source: Sage Policy Group, Inc.