Establishing the manner in which the termination was executed, and the agency’s compliance with appropriate contract and statutory provisions is the first step in determining a contractor’s entitlement to recovering cost related to termination. Further, correctly identifying the details surrounding the termination will assist in developing a claim strategy.
There are two types of construction terminations; for convenience or default. Termination for convenience (T for C) is an owner’s unilateral termination of a contract at any time and without reason and, in most cases, allows the contractor to recover costs and losses due to the termination. Termination for default (T for D) is an owner’s unilateral right to terminate the contract because the contractor failed to perform as specified in the contract. Once a termination occurs, it is incumbent on the contractor to take certain steps to protect itself, namely: stop operations as directed; protect the work in place; protect stored materials, provide a safe environment at termination, address status of all subcontracts, purchase orders, and vendor agreements.
Exponent’s construction consultants have guided clients through the termination process and assist in protecting their interests throughout the process. After assisting clients in exiting the site in a safe and timely manner, Exponent will determine causation, if any, and outline the steps required for recovery. For any alleged cause of termination, Exponent will evaluate on a point-by-point basis any arguments put forth by the owner. Whether allegations exist of nonpayment, nonperformance, insufficient staffing, code, rule, or law violations, poor workmanship, or breach of contract, Exponent will review project records to determine the facts and prepare rebuttal.
Calculating a contractor’s termination costs requires in-depth knowledge of accounting, the contract terms, and prevailing laws. Exponent will assist in calculating costs associated with work performed, termination costs, overhead, and profit. In addition, Exponent will evaluate and determine appropriateness of any termination for default costs claimed by the owner.
Should you find yourself involved in a project that has led to or may result in a termination, Exponent’s professionals can guide your team through every step in the process.