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)Use legal terminology and case law citations as much as possible. Please provide example of a connection to textbook case

 

• 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?