Articles Posted in Government Contracting

A contractor bid a price of one penny per cubic yard to excavate rock from a town site as part of a larger contract with the town of Avon. That price, however, was based on the town’s estimate of rock to be removed which turned out to be unreasonably low. The actual amount of rock to be removed was 250% higher than the town’s bid documents. The one-penny price was a loss leader based on a line item in the invitation for bid (IFB) and made the bidder’s overall price more attractive. The case is Celco Construction Corp. v. Town of Avon (Superior Court, appealed to Mass. Appeals Court, 2015).

When it became apparent that there was much more rock than represented, the contractor sought assurances, and received them from the town’s water superintendent, that the situation would be “dealt with” once the additional rock had been removed and the total extra quantity was known. Based on this assurance, the contractor continued to work and completed the contract. When the contractor later sought $190 per cubic yard for removing the additional rock, the town refused to pay and ultimately litigation ensued.

The contractor sought payment based on: (1) changed site conditions (the actual amount of work was two and one half times the amount in the town’s IFB); (2) the principle that the contractor should be paid the reasonable value of the extra work performed; and (3) the superintendent’s promises to fairly address the issue later. The Superior Court judge and the Appeals Court found in favor of the town:

Changed Conditions

  • Massachusetts G.L.c. 30, section 39N is designed to protect contractors from unknown and unforeseen conditions. The Appeals Court held that this does not protect contractors from an increased amount of a known condition which causes financial hardship because of a low unit price. Had the contractor been able to provide evidence that the additional rock was different in a significant way or that the cost to extract the additional rock was greater by reason of the increased amount or any other concealed condition, the contractor likely would have been entitled to additional compensation. However, in this case, the actual subsurface or latent physical conditions encountered at the site did not differ substantially or materially from those shown in the bid documents. The court stated that the purpose of the statutory protection is to remove unknown risks from the competitive bidding process. Based on the facts of this case, even dramatically increased volume, where pricing is based on unit pricing, is not considered an unknown risk covered by the statute according to the court’s ruling.

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Facing potential litigation from the government on behalf of a public entity can be a daunting thing for any business owner and consultation with an attorney experienced in litigating matters against the government is always a good idea. laweducationseries2.jpg

That is the situation currently facing three companies: an agricultural biotech firm, a pharmaceutical company and a chemical manufacturer, which are each currently facing a class action lawsuit brought by the city of Lexington on behalf of its school districts and others who have allegedly been affected by products used in construction of school buildings between the 1950s and 1970s.

The city is alleging that these companies produced and distributed a product known as polychlorinated biphenyls, more commonly known as PCBs, which was a widely-used chemical several decades ago. However, it has since been learned that it may contain a cancer-causing agent if individuals are exposed to the chemical over long periods of time.

The city says the companies had a duty to warn of the dangers of the product, and wants the companies to pay for demolition and replacement of these products within the school buildings, in some cases replacing the entire school buildings altogether.

Company representatives for the biotech firm reportedly noted that the company as it exists today never had an agreement with the city, so the “duty to warn” theories that are listed in the suit aren’t supported by state law. Further, according to claims mentioned in news reports, the school that is named in the suit was built a number of decades ago, hasn’t been well-maintained, and was actually schedule to be demolished several years ago. It’s been alleged that the school has long since outlived its intended life, and it’s questionable that the school is bringing the matter forth now, considering it is now in the process of rebuilding, with a scheduled re-opening in the spring of 2014.

City officials say they had already made plans to replace the school within the next 10 years, but when the high levels of PCB were found, the project was fast-tracked. There were requests from emergency funding from the state. PCB manufacturing was banned by Congress back in 1977 and the Environmental Protection agency banned the use of the compound two years later, except in equipment that’s entirely enclosed.

But the companies countered that a number of building codes in the state that were in place at the time of the original construction actually required PCBs to be present in certain electrical equipment, particularly in facilities like hospitals or schools, where fire risks were of serious concern. PCBs were also used a great deal in materials such as caulk and lighting ballasts.

The class action would represent all school districts in Massachusetts that have reported at least one building with airborne PCB levels that are higher than the maximum amount allowed by the Environmental Protection Agency guidelines.

This case could continue in the court system for years, providing an extreme example of the stress that can be involved when a business is embroiled in a legal battle with the government. Our firm works to minimize your burdens and move aggressively toward a favorable outcome for our clients.
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Our Boston business lawyers have written previously about the issue of slippery slopes in government contracting. It bears repeating in light of a recent case regarding the alleged ethics violations by a supermarket chain and local officials that have landed both in court. grocery.jpg

It involves a Stop & Shop grocery store, which had long been planned on Route 10 in Easthampton. A lawsuit has been filed by an opponent of the store, and a Superior Court Judge recently ruled that there is enough evidence in the case to move forward.

The central issue is whether the communications between store representatives and officials with the Easthampton Planning Board back in 2009 and 2010 were in violation of public meeting laws. The discussions were reportedly regarding the permitting process.

Deals with the government simply can not be handled the same way they would be if you were doing business with a private corporation. Not only are you subject to the local ordinances and guidelines, but you also have state and even federal laws to contend with regarding everything from bidding to permitting to planning to billing. If you’re not careful, you could easily wind up entangled in a messy legal battle that could have been avoided with the help of an experienced Boston business lawyer.

In this case, the lawsuit was filed by a man who owns a gas station and car dealership across from the site where the supermarket is planned. That business owner has long opposed the project, saying that the construction of the store will create major traffic headaches that will impede his customers from entering. He claims that the city didn’t follow the proper protocol when they granted the supermarket chain a special permit.

The Superior Court judge held the decision of whether to dismiss the case or allow it to move forward. In choosing the latter, he said that the communications between the store representatives and planning board officials could potentially be construed as lobbying, with the express purpose of influencing the board’s decision.

Now in the regular corporate world, there’s nothing wrong with lobbying or with pushing the case for why your company should be chosen over others. However, when dealing with the government, it can be stressed enough that you have to be extremely careful.

Planning Board officials said in a recent hearing that the meetings had been appropriate and were mostly intended to discuss scheduling and certain procedural aspects of the process. However, lawyers representing the gas station and dealership owner contend that the meetings were an effort to “gauge the temperature” of the different board members. Where it rises to the level of possible illegal conduct is the allegation, supported by documentation, that board members may have instructed the supermarket representative on how to best present the information at the next public meeting in order to gain permit approval.

Previously, the board had denied the special permitting for the store because there were zoning ordinance violations with regard to the proposed parking lot. But a few months later, a scaled-down proposal was granted permitting by the board.

Attorneys for the city say that the supermarket could still move ahead with plans to build while the lawsuit is pending, but if a judge ultimately decides to overturn the board’s initial permitting decision, the store will be the one held liable. That would be a costly position to be in.

Such situations can be avoided with guidance from an experienced Boston business lawyer.
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A $2.5 million contract has been awarded to a research and development firm by the Commonwealth of Massachusetts, in an effort to enhance detection and prevention of Medicaid Fraud throughout the state. signacontract.jpg

The company, Dynamics Research Corporation, is one of thousands that can count themselves among the businesses that thrive by selling their services to the government.

Our Boston business attorneys know these contracts can make or break a small business, so it’s critical to have your attorney review the details of your contract before you sign it.

Having the government as a client can be a huge plus. For one, you know you’ll likely be paid in full and on time. It can mean steady work and income – which is gold in this current economic climate.

However, the government also is entitled to a fair, competitive price as a matter of law and wields enormous power and influence. A Massachusetts business law firm can often help you avoid pitfalls you may not even have considered.

Just landing a government contract is not as simple as it would be with a private client. You must go through the bidding process, in which the government is supposed to award the contract to the company who bids the lowest or is seen as the most competent.

The bidding process is supposed to be fair and transparent. However, that doesn’t always happen. When bids are unfairly awarded to another company over yours, you have the option of making a bid protest. The laws regarding this process are complex, which is why you’ll need an attorney to help ensure your rights are portected.

And even if you are awarded the bid, there are still some things to consider. First, as a contractor with the government, you need to understand that the details of that contract – including how much you are paid, and for what work – are most likely going to be considered public record and fair game to the public, should they choose to review it.

Next, understand that the government is going to have the home-court advantage with the contract. That’s because whatever service or goods your selling in their jurisdiction are going to be governed not only by federal and state laws, but also by local regulations, over which the local authorities have power. Know, too, that your contract will be or has already been thoroughly vetted by the city or county’s attorney. You deserve to have someone with the same legal knowledge scrutinizing that contract with you and your company’s interests in mind.

Even if you’ve worked with government agencies before, you may not have worked with this particular branch of government, or the rules may have changed since the last time you had a contract with them. Either way, it’s wise to have your attorney review all documents before you sign on the dotted line.

In the case of the DRC contract, the agency has been tapped to develop a model that will reveal improper Medicaid payments. It will also integrate current claims processing with newer technologies, so as to streamline the process. It’s an extensive project that’s going to require a great deal of time and energy from the contractor.

Regardless of the size of your company or contract, having an attorney to walk you through the process is essential.
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A Boston contract dispute has arisen at a Middleboro gas and electric board, which questions whether the general manager of the operation has a valid contract or is even legally the leader of the department. contractsignature.jpg

Our Boston contract dispute attorneys understand that this involves a government contract that the individual had with the town’s gas and electric commissioners.

The board voted to fire the acting general manager (contract or not) after certain of his actions were called into question. Namely, he had gotten into the habit of staying in local hotels after late meetings and during particularly bad storms. He then would send the bills to the taxpayer-funded G&E.

Additionally, the general manager would attend conventions that lasted two and three days, but was then reimbursed for longer trips. It was later determined that the commission was also subsidizing his dues for the Rotary Club, as well as meals at the club’s weekly meetings.

Those are all serious allegations, but what is really being called into question is whether the commission can fire him at all, or whether he has certain protections as stated in a contract he signed in 2009. The general manager and his attorneys say that in 2009, he signed a contract with the man who previously served as the commission’s chairman. That contract, he maintains, is legally binding.

However, that chairman was not re-elected to office (he opted out at the last minute). The commission maintains that it was in the midst of talks with the general manager to determine the details of his contract. Yet they maintain that the contract the general manager signed was not formally approved by the board – and therefore, doesn’t hold any legal merit. They contend that means they can fire him at any time, without cause.

Meanwhile, the commission is undergoing a forensic audit of all its finances. Due to that, the commission has voted to suspend any contract talks until the audit is finished. So in the meantime, they plan to continue to allow the general manager to maintain his current duties – but say they won’t concede that he has any rights to the position.

Of course, our Boston business lawyers can’t parse out who is right and wrong from a few media reports. What is important to note in this whole dispute is that any time you sign a contract, it’s critical to have an attorney review it to ensure that you are on solid legal footing before signing it. In this case, the commission is not contending that there is no contract – just that it’s not legally valid. But if this general manager signed on with the commission chairman, it’s likely he had no reason to believe the contract wasn’t legally binding. He likely skipped having it reviewed by an attorney because he figured his I’s were dotted and T’s were crossed.

This case illustrates why you can’t always trust even the words in black and white, without input from an experienced business attorney.
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Robert Kraft, owner of the New England Patriots, is suing the town of Foxborough in a Massachusetts business litigation case that is starting to get ugly.

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As our Belmont business litigation attorneys understand it, at the heart of the issue is a government contract involving two billboards, posted on land owned by Kraft and posted near Gillette Stadium.

For the last five years, there has been an agreement that has worked out well for all sides. This involved the split of advertising revenue acquired from these boards between the town and FXP, which is another of Kraft’s business ventures.

But the timetable on that agreement is set to run out in mid-May. Kraft has said that after that, the town needs to move the billboards. The town, meanwhile, claims that the agreement stipulated Kraft had to give up rights to the billboard after that five-year deadline.

According to Business Week, the town continued on with its seeking bids for construction on the billboards and also for other advertisers. When Kraft objected, the city threatened to seize the land by order of eminent domain.

When Kraft tried to schedule a time slot to speak before the town’s governing board, the board refused to hear him, prompting Kraft to file a federal civil rights claim, which resulted in a temporary restraining order that required the board to allow him to speak. Kraft’s lawyer was quoted as saying the town manager knew that what Kraft would say was contrary to the town’s desired action, so he was denied the right to present that opposition in a public forum.

Town officials say they have easements, or a right to use the property, even though they don’t own it. Kraft doesn’t argue with that, but says those rights don’t mean they can hang on to the billboards – and the profits derived from them.

In this situation, Kraft is a multi-millionaire, with a lot of clout and the resources to go up against the town of Foxborough. However, smaller companies would have a more difficult time facing down the government. This is where having an experienced small business litigation lawyer on your side is going to greatly improve your odds of an outcome in your favor.

It’s especially important to get out in front of an issue like this before it snowballs. Any time you sign a contract with a government, you should have your own attorney review it. This will not only ensure that the terms are clear and fair, but that there will be no surprises down the line.

Entering into an agreement with a government is much different than one you might enter with another company. Often, that starts with how you get the contract phase at all – through bidding. Whoever can effectively complete the project or service for the least amount of money, in theory, will land the contract.

However, consulting with a lawyer before signing on the dotted line can save you many headaches.
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For government entities and the construction companies that do business with them, the question often comes up, “What are the prime responsibilities of a recipient of Federal funding (Recipient), in monitoring the performance of General Contractors with respect to Disadvantaged Business Enterprise (DBE) participation and goals?

Design Build Procurements Pursuant to Mass. Gen. Laws c. 149A
In a Design Build contracting situation, a Recipient of Federal funds enters into a master contract with a general contractor (GC), who in turn enters into subsequent subcontracts for the work of the project. It is up to the Recipient to monitor the GC and its subcontracts to ensure that established DBE goals are met or, if they are not, determine whether the GC has exercised good faith efforts to attain those goals. The project’s GC establishes contract goals, as appropriate, for the subcontracts it enters into. Recipients must maintain oversight of the master contractor’s activities to ensure that they are conducted consistent with Federal regulations (and state regulations, if applicable) with respect to DBEs:
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