Construction contracts most often require contractors to issue written notice of claims and change orders. The purpose of providing notice in writing of a change or impact is to afford the notified party adequate time to investigate the matter and manage associated risks. In the most basic terms, notice provisions detail what is expected from the contractor and establish deadlines for providing notice to the client. The contract may also specify the level of detail or required content of a notice.
Federal Government Contracts
In contracts with the federal government, the standard notice provision relating to contract claims and change orders appears in the Federal Acquisition Regulations (FAR).
Paragraph (b) of FAR 52.243-4 (Changes) states a contractor who regards an owner directive as a change to the contract must provide:
…written notice stating – (1) the date, circumstances, and source of the order; and (2) that the Contractor regards the order as a change order.
FAR 52.243-4(d) clarifies that:
…except for an adjustment based on defective specifications, no adjustment for any change under paragraph (b) of this clause shall be made for any costs incurred more than 20 days before the Contractor gives written notice as required.
Paragraph (e) further adds that:
The Contractor must assert its right to an adjustment under this clause within 30 days after (1) receipt of a written change order under paragraph (a) of this clause or (2) the furnishing of a written notice under paragraph (b) of this clause, by submitting to the Contracting Officer a written statement describing the general nature and amount of proposal, unless this period is extended by the Government.
As seen in the FAR Changes clause, construction contracts often contain language stating that if the contractor fails to issue timely notice, the contractor waives the right to recover for time and damages associated with the impact event.
Notice Provisions and Construction Claims
It is not at all surprising then, that these notice provisions frequently play a role in construction claims. Defendants will often attempt to dismiss a claim or change order request on the grounds that the contractual notice provisions were not met. Ultimately, although failure to give proper and timely notice can affect a claim position, non-compliance with notice requirements does not necessarily deny the contractor a path to recovery.
Construction Claim Considerations
While contractors should be familiar with the notice requirements of a contract, failure to adhere to the provision does not mean that a claim is inevitably doomed.
Here are some things to consider when a contractor has failed to satisfy the notice requirements outlined in the contract.
- Oftentimes, it is difficult to comply with the contractual notice period simply because the nature of the impact makes it impossible to identify the event as problematic until after the notice timeframe has elapsed.
- If an owner attempts to reject a claim on the basis that the notice requirements were not met, a contractor may be able to demonstrate that the owner, in fact, knew of the circumstances that are the basis of the claim, or that the owner’s actions implied that the owner waived notice requirements.
- Another defense against such procedural rejections is for the contractor to argue that failure to provide notice caused no material prejudice to the owner.
Contractors should familiarize themselves with contractual notice provisions and should endeavor to comply with such notice requirements when pursuing a claim. Compliance is the simplest way to avoid a denial due to notice (in whole or in part). However, when contractors fail to comply with notice requirements, understanding the foregoing considerations will assist in pursuing or responding to a claim without proper notice.