On May 30, 2023, the Washington Court of Appeals, Division I, issued a decision that appears to expand a contractor’s obligation with respect to WSDOT notice and claim procedures. In Graham Contracting, Ltd. v. City of Federal Way, No. 83494-1-I, 2023 WL 3721171 (Wash. Ct. App. May 30, 2023) (Unpublished), the Court held that under the 2016 WSDOT Standard Specifications for Road, Bridge, and Municipal Construction (“Standard Specifications”), a Contractor must protest the actions of not only the “Engineer” but also the actions of any person or organization acting on behalf of the Owner.
This case arises out of a public construction contract in which Graham Contracting Ltd (“Graham”) built a multi-million dollar roadway improvement for the City of Federal Way along a stretch of Pacific Highway. The appeal was from the trial court’s granting of the City’s motion for summary judgment to dismiss claims by Graham for extra time and money due to delays and impacts to Graham’s construction of the Project.
The City’s defense rests on specification 1-04.5, which, in the 2016 Standard Specifications, states:
If in disagreement with anything required in a change order, another written order, or an oral order from the Engineer, including any direction, instruction, or interpretation by the Engineer, the Contractor shall: 1. Immediately give a signed written notice of protest to the Project Engineer or the Project Engineer’s field inspectors before doing the work; 2. Supplement the written protest within 14 days with a written statement and supporting documents [supporting the protest].
The Standard Specifications also provided that failure to comply with this provision may result in waiver of the contractor’s claim: “The Contractor agrees to waive any claim for additional payment if the written notifications provided in section 1-04.5 are not given[.]”
With respect to the term “Engineer,” the 2016 Standard Specifications define “Engineer” as follows: The Contracting Agency’s representative who directly supervises the engineering and administration of a construction Contract. In turn, the Contract documents as well as other Project records identified a single individual as the Project Engineer: a City employee John Mulkey.
After a couple of months on the job, Graham discovered design conflicts relating to the joint utility trench (“JUT”), and Graham sent a notice of delay to the City’s Engineer, John Mulkey, related to the relocation of transmission and distribution lines to the JUT. The City’s design consultant, KPG, informed Graham that the Contract required Graham to leave the distribution lines on the existing poles. A few weeks later, Graham requested a meeting to discuss the issue. Following the meeting, the City’s director sent a letter to Graham stating that Graham’s claim was denied because Graham had failed to properly protest KPG’s correspondence in accordance with the Standard Specifications, thus waiving Graham’s claims, which exceeded $11 million.
In response to the summary judgment motion and on appeal, Graham asserted that it met the terms of the Specifications as it notified the City’s “Engineer” John Mulkey of significant delays and cost impacts due to design issues related to the Project’s JUT, and that until a direction, instruction, or interpretation by the Engineer—John Mulkey—was issued, there was no determination to protest. In contrast, the City asserted that because otherindividuals who were acting in connection with the City made statements and other determinations, Graham waived its claim because it failed to protest these other individual’s statements.
The Court of Appeals sided with the City. The Court wrote, “Nothing in [Sections 1-04.5 or 1-09.11] narrows the procedural requirement to claims arising only from orders or decisions of the Project Engineer. Instead, the provisions as a whole reflect an intent for the parties to seek resolution of all disputes through the Project Engineer before filing a claim for additional compensation.”
Commentary:
This is a troubling decision by the Court of Appeals as the Court disregards the plain language of the Specifications, expressly tying the protest requirement to a “direction, instruction, or interpretation by the Engineer.” While courts in several recent cases have held contractors to strict compliance with notice provisions, here, it appears the Court is not holding the City to the same standard.
As the WSDOT Standard Specifications involved in this case have been revised since, including broadening the provisions referenced above,[1] it is critical that a party with a dispute review the contract provisions applicable to their project and consult with an attorney. Further, each notice dispute is inherently dependent on the specific contract provisions and set of facts applicable to the dispute at issue, but it is important for parties to proceed with caution, especially given the increasing prevalence of project owners or upper tier contractors seeking to dismiss claims early in litigation based on technical deficiencies rather than based on the merits of the claim. For further discussion on notice issues, please see Construction Contract Draconian Notice Provisions: Is Prejudice Still the Issue? and Part 2: Construction Contract Draconian Notice Provisions – Is Prejudice Still the Issue?
Graham petitioned for review of this decision to the Washington Supreme Court with support from an Amicus (Friend of the Court) brief submitted by Associated General Contractors (AGC) of Washington and National Utility Contractors Association of Washington, submitted by Brett Hill of ACS and Tom Krider of Smith Currie Oles. The Supreme Court denied review on December 5, 2023.
[1] The 2024 Standard Specifications Section 1-04.5 states “If in disagreement with anything required in a change order, or the Engineer’s Written Determination or decision that the Contractor believes they are entitled to an increase in the Contract price or time, the Contract shall…”