Connecticut Superior Court Affirms Judgment for Contractor on Claim for Extra Work, Holds Substantial Compliance Satisfies Notice Requirement and Approves Damages Calculated on Variants of the Total Cost Method and Eichleay Formula

Paragon Constr. Co. v. Dep’t of Pub. Works
2013 Conn. Super LEXIS 789 (Conn. Super. Ct. 2013)

The Connecticut Department of Public Works and the Connecticut Department of Corrections (collectively “the State”) solicited bids for the renovation of a correctional center. Paragon Construction Co. (“Paragon”) was awarded the contract, and it subcontracted with MacKenzie Painting Co. (“MacKenzie”) for work relating to de-leading and painting security bars on the windows of the correctional center.

Following substantial completion, the State disputed Paragon’s entitlement to payment for additional work and costs caused by delays. As a result, Paragon sued the State for breach of contract on two grounds: that the State failed to pay for de-leading work that was beyond the scope of the contract, and that the State caused delays in the project, which resulted in damages to Paragon.

The extra work claim centered on whether the contract documents required Paragon to de-lead and paint existing security bars in addition to the new security bars installed as part of the project. The court found that Paragon and MacKenzie fairly read the contract documents as unambiguously requiring painting and de-leading for the new security bars only. The court further found that to the extent the contract contained an ambiguity, it was a latent ambiguity, required to be construed against the State as drafter of the document. Therefore, the court held that de-leading and painting the existing bars was extra work, and that the State’s failure to pay was a breach of contract.

The State also defended the claim by arguing that Paragon waived its right to seek an adjustment of the contract price because the contract required written notice of a claim within seven days after the occurrence of the event giving rise to the claim. Though the evidence was undisputed that Paragon sent notice of its claim 15 days after it was ordered to paint and de-lead the existing security bars, the court found that Paragon’s substantial compliance with the contract terms was sufficient under Connecticut law absent prejudice to the State.

Having found that Paragon was entitled to compensation for the additional work, the court addressed Paragon’s measure of damages. Paragon submitted its claim under the total cost formula by subtracting MacKenzie’s de-leading subcontract price from the total cost that MacKenzie ultimately billed Paragon for the work. The State cited authority from other jurisdictions that have rejected the total cost method. The court affirmed the damage award upon finding that the total cost method provided a sufficient basis for a fair and reasonable estimate of Paragon’s damages. In particular, the court noted that because MacKenzie only performed de-leading and painting work, all extra costs billed by MacKenzie were fairly attributable to the extra de-leading and painting work imposed by the State.

Under its delay claim, Paragon sought damages for the additional expenses it incurred in working on the project for four years, when the State had projected it to last eight months. Finding that the State was responsible for the delays, the court addressed Plaintiff’s presentation of damages for unabsorbed overhead under the Eichleay formula. The State argued that Paragon had not proved its damages because it did not meet the standards commonly applied in federal jurisdictions, such as demonstrating that the State placed Paragon on standby or issued an order suspending the work. The court rejected the State’s argument, finding that Connecticut law permits a claim for unabsorbed overhead without the need for compliance with the Eichleay formula’s “rigid prerequisites.”

Stephen W. Kiefer

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