Case #$7$

Chubb a large software development company entered into an agreement with a general

contractor to build a simple $50,000$ square foot office building with an open office concept. The

architect hired by Chubb questioned the three estimate line items in the contractor's guaranteed

maximum price proposal, which appeared to be heavy. Columbia Construction the contractor

responded that these costs may be needed and the owner will receive $90\%$ of any savings,

according to the terms of the contract. The contractor did not manage the project efficiently and

finished four months late. Because of this delay, the contractor reported that they overran the

bottom$-$line GMP and there were not any savings to share. If a contractor mismanages the

work, does the owner lose an opportunity for savings? The architect closely monitored the

work involved with the three subject estimate items and was confident that the contractor

underran the estimate in these areas. The contractor indicated that it was not a "line item

guaranteed maximum price estimate, but rather only the bottom line was what was

guaranteed."

Questions:

$($NOTE: Explain Your Answers in Detail.

Think Outside the box i$.$e$.$ subsequent damages, countersuits$)$

If there were savings on single line items, especially ones that were questioned early,

can the contractor use these savings to offset overruns in other areas? Is this legal?

Will an audit now help either party?

What do standard contracts say?

Lastly, if a contractor mismanages the work, does the owner lose an opportunity for

savings? What are the legal ramifications or considerations?