Compensation for the loss of an incen- tive bonus is not âdamages for delayâ within the mean- ing of such a provision.â278 The appeals court held that Davinroy v.
The court held that the bonus is âan element of dam- ages, naturally flowing from the breachâ¦.â277 Second, the court rejected the âdefendantâs argument that the bonus is barred by the âno damages for delayâ provision of the contract.
The con- tractor alleged that certain events attributable to the State resulted in additional cost to perform the work and a delay of 64 days in completion.266 The special pro- visions to the contract stated: Should the contractor be delayed in the commencement, prosecution or completion of the work for any reason, 257 Id.
Transit Agenciesâ Success with Incentive Payments and Liquidated-Damages Clauses Transit agencies in their responses reported on their experience with performance-based contracting.
In do- ing so, transit agencies stated variously that per- formance-based contracts permit an agency to state what its requirements are while relying on the contrac- tor to determine the best way to deliver the service, or product, in accordance with industry standards or best practices;213 that incentives and liquidated damages are additional tools to obtain on-time, on- budget per- formance from vendor partners;214 that the method of contracting allows for the evaluation of each submittal in accordance with the needs of the agency as outlined in the procurement documents;215 and that liquidated damages, for example, are a useful method to enforce delivery or performance requirements.216 Transit agencies consider the use of performance- based clauses to be another aspect of the best prac- tices to use in securing the timely performance of their construction and other contracts.
After- wards, Anjo submitted a claim for extra labor costs and profit on the costs as well as for other extra work and costs.254 The Board of Claims ruled in Anjoâs favor on dam- ages sought for acceleration costs and other expenses but denied other aspects of the claim, such as the claim for profits on the additional labor costs.255 On appeal, Anjo argued that the denial of part of its claim was error while the DOT argued that Anjo was not en- titled to acceleration damages and that the Board had disregarded language in the contract that precluded a claim âbased on impacts from extra work.â256 The DOT contended that Anjo was not entitled to damages for extra labor costs because the department never ordered Anjo to accelerate its performance.
Although Anjo notified the DOT on January 30, 1987, that the design errors would seriously delay the project, the DOT did not im- mediately adjust the projectâs completion date.253 Ulti- mately the completion date was changed to March 18, 1988; however, Anjo completed the project by De- cember 9, 1987, and received the full incentive.
The Effect of Incentive Payment and Liquidated-Damages Clauses on Contract Claims Although not providing any details, only two agen- cies reported having been involved in any litigation over an incentive payment or a liquidated-damages clause.235 Some litigation was avoided through negoti- ated settlements.
26 agency does not delay a contractor in meeting mile- stones established by the contract.234 C.
More- over, a memorandum of understanding âstated that DOT would consider costs previously incurred by [Anjo], which have been identified as necessary to ac- celerate the work in an attempt to maintain the project schedule.â (Internal quotation marks omitted.) 258 Even though the DOT ultimately extended the con- tract, the court held that the DOT had not granted the extension within a reasonable time, noting that Anjo had begun accelerating its work prior to the exten- sion.259 Furthermore, the court agreed that the accel- eration was not to earn the incentive payment but to meet project deadlines, pointing out that Anjoâs extra labor cost exceeded the incentive payment by 0,000.260 Another acceleration case is Edward Kraemer & Sons, Inc. City of Overland Park.261 Edward Kraemer & Sons (Kraemer) repeatedly requested a change in the completion date of certain aspects of a highway construction project to reflect the depart- mentâs delay in issuing a notice to proceed.
creased costs incurred as a result of accelerating per- formance, when (1) its own delays in performance are ex- cusable, (2) the contractor was ordered to accelerate, and (3) the contractor did so and sustained extra costs.257 The court agreed with the Board that the DOT con- structively ordered Anjo to accelerate its work.
A compromise was reached prior to the claim being adjudi- cated.237 One agency stated that performance-based contract- ing has resulted in no litigation for the agency,238 but the MBTA stated that there have been a few claims that were settled through negotiations with contrac- tors.239 Although the use of liquidated-damages clauses are useful as leverage in resolving disputes with con- tractors,240 one agency stated that their use may in- crease the potential for the termination of a contract for nonperformance.241 Finally, if managed too aggres- sively or brusquely, performance-based contracting may âdrive a wedgeâ between the transit agency and the contractor.242 D. 240 Survey response of San Mateo County Transit Dist. A constructive acceleration order may exist, when the government unit merely asks the contractor to accel- erate or when the government expresses concern about lagging progress.