Owner Paid Unit Price, But Accepted Fixed-Price Bid

Wednesday, December 27, 2017 9:32 am
January 2018 - Volume 40 Number 1

Contract Price --- Ambiguity

Rudzik Excavating, Inc. v. Mahoning Valley Sanitary Dist., 2017 Ohio App. Lexis 5053 (11th Dist. Nov. 20, 2017)

A contractor agreed to perform excavation work for a Mineral Ridge, Ohio utility company, but the parties disputed whether it did so under a fixed-price or unit-price contract. The answer meant that the contractor got to keep its half-a-million-dollar jury award for damages for unpaid work and lost profits.

Rudzik Excavating, Inc. (Rudzik) submitted a bid to Mahoning Valley Sanitary District (the District) that contained three prices, one for Base Bid 1 and one each for two alternate tasks. Base Bid 1 covered removal of lime-sludge by-product from a drinking water lagoon, as well as placement of sand in that lagoon and some road repair. Rudzik’s price for Base Bid 1 was $1,260,000. The District awarded Rudzik the contract and certified that the full contract price ($1,694,000, including the two alternates) had been appropriated by the District, but it didn’t fully pay Rudzik for completed work on the project.

When Rudzik submitted its first progress payment application for $441,000, it based the amount on the percentage of work completed up until that point (35% x $1,260,000). The District balked, claiming it wasn’t required to pay a percentage of the total cost of sludge removal---or a percentage of Rudzik’s other costs, such as labor, equipment, materials, and road repair work.

Instead, the District insisted it was required to pay only for the amount of sludge removed multiplied by Rudnik’s bid "unit price" of $16/per cubic yard. Thus, on this first payment application, the District paid Rudzik $400,640 for removal of 25,040 cubic yards of sludge---the amount estimated by Rudzik’s subcontractor. The District then later conten[..]