Legal Corner

Construction & Public Contracts Group, Hinckley Allen, LLP Christopher Morog Partner Robert T. Ferguson Partner

Massachusetts Superior Court Strikes Down Disincentive Provision in MassDOT Bridges Contract

In an October 2020 summary judgment decision, the Massachusetts Superior Court upheld a general contractor’s challenge to the enforceability of a “disincentive” provision in a MassDOT construction contract. In addition to providing for liquidated damages, the contract stated that MassDOT “shall assess” a per day “disincentive deduction” in the event the contractor failed to achieve certain interim contractual milestones. After full briefing and a hearing, the Court concluded that MassDOT’s disincentive provision was an “unlawful penalty.” Hinckley Allen represents the general contractor.

The case arose out of a MassDOT contract for the replacement of four bridges in southeastern Massachusetts. The contract established interim milestones for completion of the bridges. In order to “encourage the contractor to use innovative methodologies and techniques to achieve early project completion and to achieve certain milestones,” the contract included an “Incentive/Disincentive Specification.” Simply stated, the provision rewarded early completion with potential bonus payments but subjected the contractor to “disincentive deductions” (up to a maximum of $600,000) for late com- denied the contractor’s requests on grounds that the pletion of the milestones. The Incentive/Disincentive interim milestone was generally “not adjustable, reSpecification made clear that it did not alter or other- gardless of fault or reason.” wise affect the liquidated damages provision of the On summary judgment, the Superior Court contract. noted that “[c]ontracting parties cannot lawfully em-

Invoking the Incentive/Disincentive Specification, ploy compensatory damages as a means to punish MassDOT had assessed $600,000 in disincentive or incentivize.” That is – unlike liquidated damages deductions on grounds that the contractor did not provisions designed to provide reasonable damages timely complete one of the interim bridge milestones. for delays that are difficult to estimate – contractual However, the presence of PCBs and asbestos (which “penalties” are not enforceable. required remediation) and other factors had impact- According to the Superior Court, “the Disined the contractor’s performance time. Although the centive Deductions expressly aim – and operate contractor had requested time extensions, MassDOT continued on page 25

CRANE RENTAL • RIGGING • SPECIALIZED TRANSPORT

THE HEAVY LIFTING SPECIALISTS

(781) 858-7777 • www.nacranes.com LIKE US: facebook.com/northamericancrane

MOBILE CRANES CRAWLER CRANES TOWER CRANES INDUSTRIAL CRANES BOOM TRUCKS

LOWBED SERVICE

INDUSTRIAL RIGGING

– to deter [untimely performance], not compensate sachusetts court has – after careful [for damages for delays].” And since the liquidated analysis – concluded that disincendamages provision was drafted to cover “all” ad ditional delay costs, MassDOT’s disincentive as - tive language in a MassDOT contract sessment could not also compensate MassDOT for is invalid on its face. n delay costs. As a result, the Superior Court determined that “the Disincentive is simply a penalty for contract non-compliance, Call Your Nearest GENALCO Warehouse divorced from any anticipated damages estimate.” Stating that “[i]t follows that the Disincen- WEATHER CAPS For These Supplies STROBE LIGHTS HYDRAULIC OIL GRADE 8 NUTS & BOLTS tive provision does not provide AIR CLEANERS for liquidated damages and purGREASE FITTINGS BUCKET TEETH ports to impose an unenforceHYDRAULIC HOSE BUCKET LIPS able penalty,” the court declined EQUIPMENT PAINT BUCKETS to enforce the disincentive provision. CUTTING EDGES CHAIN

SLINGS

The Superior Court’s AIR, OIL & FUEL BACKUP BELLS decision does not create ROTARY ASPHALT CUTTERS EXTREME PRESSURE GREASE FILTERS AND ALARMS controlling law, did not resolve all issues in the case, and is subject to

GENALCO inc. 1-877-436-2526 70 years of service to New England Industry www.genalco.com Needham Heights, MA Springfield, MA West Haven, CT Warwick, RI

FAX 781-449-6643 FAX 413-781-3771 FAX 203-934-2580 FAX 401-736-9769

We doubled the number of bids, and our win rate

jumped, too.

SHANNON KUYT PRIESTLY DEMOLITION

Break new ground, win more work and complete it more profitably with the unified ONE Platform for heavy construction estimating, operational workflows and business insight.

HEAR SHANNON’S SUCCESS STORY AND MORE AT B2WSOFTWARE.COM/SHANNON

B2W Estimate

www.atsequipment.com

POWER MEETS EFFICIENCY!

SK260LC-10 LONG REACH EXCAVATOR

AVAILABLE FOR RENT

SK260LC-10 LR Special jobs require specially equipped machines. KOBELCO Long Reach excavators have the heavy-duty hydraulic fi ttings and connectors excavators have the heavy-duty hydraulic fi ttings and connectors required to reliably lift huge loads from seemingly impossible required to reliably lift huge loads from seemingly impossible distances. The SK260LC-10 LR has a maximum dig reach of distances. The SK260LC-10 LR has a maximum dig reach of 60’ 10” to safely and securely tackle even the toughest 60’ 10” to safely and securely tackle even the toughest dredging, ditch cleaning or sloping jobs you’ve got. dredging, ditch cleaning or sloping jobs you’ve got.

The Connolly family and all the professional staff at ATS Equipment look forward to serving you – our friends!

ATS EQUPMENT IS YOUR SOURCE FOR KOBELCO EXCAVATORS

FOUR CONVENIENT LOCATIONS

BOSTON, MA, 33 Locust Street Tel: (617) 825-3600 AUBURN, MA, 487 Washington Street Tel: (508) 832-8500 REHOBOTH, MA, 51 Fall River Avenue Tel: (508) 379-6200 CANDIA, NH, 133 Raymond Road Tel: (603) 483-2100