Dive Brief:
- HVAC contractor Dynamic Systems Inc, headquartered in Austin, Texas, is suing New York City-based Skanska USA for what the subcontractor claims is $4.2 million in unpaid change orders for work performed on the Westchester Medical Center-Ambulatory Care Pavilion project in Valhalla, New York. Dynamic filed its lawsuit in the U.S. District Court for the Southern District of New York because the two companies are located in different states and the amount in question exceeds $75,000.
- In the lawsuit, Dynamic claims that its original contract with Skanska was $17.8 million but that $4.6 million in change orders increased that amount to almost $22.5 million. The HVAC subcontractor said all of its work has been accepted by Skanska and is seeking the $4.2 million balance owed plus legal fees, interest and other costs.
- Dynamic filed a public improvement lien on the project in May, but Skanska discharged the lien by providing a lien discharging bond.
Dive Insight:
As of Nov. 18, Skanska had not yet answered Dynamic's complaint, so there is no way to know what the company's official position on the subcontractor's claim will be, said attorney J. Scott Greer of law firm Lewis & Greer PC in Poughkeepsie, New York. Greer is representing Dynamic in the case against Skanska.
However, Greer told Construction Dive that there are rumors that Skanska is in a dispute with the owner over major design changes that resulted in additional projects costs and significant delays. "I suspect — but do not know for certain — that Skanska will not approve the change order requests [for Dynamic] until it resolves its dispute with the owner," Greer said. He added that he knows of no other reason the general contractor might be withholding payment.
A Skanska spokesperson told Construction Dive that since the matter deals with ongoing litigation, the company has no comment at this time.
Skanska's original contract amount, according to a 2016 company press release, was $140 million and included a new ambulatory operating room suite; imaging center; lobby; physician offices; a dedicated entryway for patients; roof-top mechanical, electrical and plumbing units; interior buildout; and an expansion of the medical center's existing parking lot.
The owner of the project is Westchester County Health Care Corp. (WCHCC), a public benefit corporation, according to the court filing. This is why Dynamic had to file public improvement lien rather than a standard mechanic's lien, which is used to make a claim against private property. If Skanska had not filed a lien discharging bond, WCHCC would be entitled to withhold the amount of Dynamic's lien from its payments to Skanska.
In some states, like Florida, contractors are not able to file mechanic's liens against public property but instead must turn to surety bonds for payment.
Change orders are often a source of disagreement between general contractors and owners and between general contractors and subcontractors. Even under the best of circumstances, when everyone has followed the change order process outlined in their contracts, there can still be disputes.
On the $650 million Jeppesen Terminal renovation project at Denver International Airport, for instance, the airport's former contractor, part of the Great Hall Partners public-private partnership, still has outstanding claims of $288 million for change orders and extra costs related to its termination. Great Hall claims that almost $167 million of that amount is for two dozen changes initiated by airport staff. The airport is in the process of hiring new contractors and a construction manager, but there is no telling when DIA and Great Hall will come to an agreement on final payment for changes, given that the relationship between the two seems to be on shaky ground.
