A recent Seattle Times article about construction delays on Sound Transit projects asks, “Why isn’t the Hilltop Tacoma Link Extension already carrying passengers?” In exploring the reasons behind the project’s delays, the article discusses a contract dispute between Sound Transit and one of the project’s subcontractors that reveals issues relevant to business contracts both large and small in scope.
The Hilltop Tacoma Link Extension, a 2.4-mile streetcar project with six stations, was initially scheduled to open in May 2022, according to the Seattle Times. The project’s website currently includes a timeline with construction being completed in 2022 and the line opening in 2023. Since construction on the project began in 2018, it has been plagued by delays. According to the subcontractor, these delays are rooted in Sound Transit’s failure to approve change orders in a timely manner. Sound Transit contends that the subcontractor filed its claim notices late.
A Sound Transit board member quoted in the Seattle Times article stated, “One of the things I learned is, your contract documents have got to be tight and clear.” A contract for services, such as the contract between Sound Transit and its subcontractor discussed in the Seattle Times article, typically includes a provision for changing the scope of services to be performed under the agreement. A request to change the services being provided under a contract is often referred to as a “change order.” The party performing the services will need to submit a request in writing to change the timeline, materials, or fee for the project, for example. The party receiving the services will need to approve any change orders. A contract should establish the procedure that the parties agree to follow surrounding a change order. When a contract’s terms are not clear about the process one party must follow to notify the other party of a requested change order, or the timeline a party must follow in responding to a change order, the result can be a dispute between the parties over who failed to fulfill their obligations under the contract.
Why did the subcontractor go to the press rather than sue Sound Transit? The subcontractor explained to the Seattle Times that, “litigation against the big agency is unrealistic, and anyway he won’t bid again with Sound Transit anytime soon.” The subcontractor was a relatively small business that may have felt that its resources were not sufficient to sustain the costs of a long lawsuit with an uncertain outcome. The subcontractor’s concern highlights why it is important to consider what happens under a contract if there is a dispute. Are the parties required to undergo mediation before filing a lawsuit? Does the contract require disputes to be resolved in arbitration? Is there a forum selection clause that dictates where a lawsuit can be filed?
One lesson to be learned from this story is that there is much more to a contract for services than a description of the work to be performed, the initial timelines, and the payment for those services. Well-drafted provisions addressing what happens when there is a change to the scope of work, and what each party’s duties are to provide notice and timely approval of a requested change, can go a long way toward avoiding disputes down the road.
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