Subcontractors: Be Aware of Flow-Down Provisions in the Prime Contract

The Court of Appeals of Indiana recently ruled that a subcontractor was not entitled to additional compensation for extra labor and materials because the subcontractor did not submit a claim within the contractual deadline contained in flow-down provisions from the prime contract. After Stephens Fabrication, Inc., was subcontracted as first-tier structural steel fabricator and engineer for a project at Ball State University in 2002, the University’s architect made changes to the architectural drawings which constituted a significant increase in the scope of work under the Stephens subcontract. The original purchase order between the Stephens and the contractor, Weigand Construction Co., Inc. contained, among other things, a “flow-down provision,” which provided that the terms and conditions of the Weigand-Ball State prime contract also applied to the any subcontract. Stephens failed to make a claim for additional payment within 21 days after the increase in the scope of work as required by the terms of the prime contract, so the court held the subcontractor’s claim was untimely filed and rightly rejected by the Weigand and Ball State. For the Court of Appeals opinion see Weigand Construction Co., Inc. and Ohio Farmers Insurance Co. v. Stephens Fabrication, Inc., and Ball State University Board of Trustees, 929 N.E. 2d 220 (Decided June 25, 2010).

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