How the Cumulative Impact Claim May Affect Your Company
Written by: Gene Backus
When multiple Change Orders negatively impact a construction project, particularly a larger, complex one, such as a stadium, mall or hotel gambling complex, the builder may claim damage resulting from ‘cumulative impact.’ According to a recent article written by Gene Backus, partner at Backus • Carranza, “…The cumulative impact claim is the aftermath of the inability of the contractor to accurately account for all impact costs resulting from the multiplicity of change orders. In other words, the multiple changes that produce the unforeseeable synergistic effect leading to a cumulative impact claim may or may not be changes that alter the fundamental nature of the contract.”
What are the latest decisions with regards to Cumulative Impact and how might they affect your business in 2010? In one case – L.K. Comstock & Company, Inc. v. Becon Construction Company, Inc. – according to Backus, “The difference between the analysis of the cumulative impact claim and the cardinal change breach is what is being examined. A cardinal change is one that alters the scope of performance so much, that it is beyond the original contemplated scope of work.
A contractor must be ready to show the court or board that the change order procedure, as described within the original agreement, fell short of the cumulative impacts a number of change orders might necessitate. If he is to establish a cumulative impact claim that will hold water, he’ll have to be ready to convince listeners that there was no way to anticipate how these changes would play out, in advance.
“So where are we in 2010?” asks Backus. “This author/presenter is of the opinion that a cardinal change is an inappropriate requirement in any cumulative impact claim. Proof of a fundamental alteration of the contract may be an additional theory of recover allowing the contractor another route to recovery, but should not be a predicate for recovery under a cumulative impact claim. Certainly, if the owner has so fundamentally altered the contract that the contractor is entitled to claim a breach of contract, the contractor should be able to recover impact damages under a quantum meruit or modified total cost methodology.”
In the course of the article, Backus shares extensive background and history of different cases and instances involving cumulative impact claims. The reader grows to understand the magnitude and importance of an attorney doing his homework in order to properly represent a contractor in such a case. As Backus says, “Cumulative impact experts must be prepared to have the background and knowledge to support opinions that are testable and based upon methodology that is generally accepted in the construction industry.”
Clearly, a qualified expert in this field may be hard to find; but could be of almost inestimable value in convincing a judge or board.