A recent Maryland case is interesting because an owner’s rep tried to sue a CM for giving a way low preliminary GMP. Due to the contract language – that argument didn’t work. The CM sued for the changes the owner’s rep refused to authorize.
Key to the analysis is that the owner’s rep held the CM contract.
Parties and Contract
Owner building a church hired SRP as its owner’s rep. The Owner’s rep picked a CM – JE Dunn and the Owner’s rep and CM signed a preliminary GMP for $31M – final GMP was to be when plans were fully developed. At 55% done, costs neared the GMP amount. Final GMP never got signed.
Contracts Terminated, Contact Entered
When the owner learned of the overruns, it fired the owner’s rep who terminated the contract with the CM. The owner then directly contracted with the CM who finished the work but then sued to recover $3M.
Claims and Counterclaims
The CM sued the owner’s rep (and the owner) for change order work it performed but which the owner’s rep refused to authorize or pay.
The owner’s rep sued the CM alleging it circumvented the owner’s rep to deal directly with the Owner. The court said that since it was not prohibited in the owner’s rep/owner contract -it was OK.
Second, the owner’s rep tried to argue – the CM negligently represented it could do the work for the GMP and failed to investigate or reveal the real costs. The court rejected this and said the preliminary GMP was never set as a finalized GMP after all the plans were done.
Owner’s Rep Loses
The owner’s rep lost both its counterclaims – the GMP left room for upward modifications.
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