The Facts

Acme Corporation, an engineering and surveying firm, was hired without a contract by a general contractor to obtain permits, conduct site surveys and perform soil testing, site design, earthwork design, and final construction certification for a dairy farm.¹ The dairy was supposed to be a “dry scrape” dairy, and the owner was required to haul the manure to local compost plants. Acme Corporation indicated that a dry manure handling system did not require a permit. After the project was complete, the dairy found it impractical and expensive to haul the manure daily and began stockpiling manure on-site and on the fields. The neighbors quickly complained, and Acme Corporation was asked to provide alternatives for additional storage facilities. Because of many code violations, the Department of Natural Resources was not willing to issue a permit for additional storage facilities. The owner claimed that Acme Corporation improperly designed the dry scrape daily haul system and that it was not feasible for the dairy farm to put into practice and claimed damages ranging from $500,000 to $750,000.

The project was done on a fast-track basis, with the owners trying to get the project off the ground as quickly as possible in an effort to beat anticipated code changes by the State Department of Natural Resources which would have increased costs.² The general contractor, who was also ½ owner of the project, selected the dry scrape system, but did not do their due diligence. If they had, the contractor would have discovered this method of disposal is very expensive and labor intensive.

The Result

The dairy filed a lawsuit claiming $5.5 million in damages due to increased costs for the facility, lost production and increased operating expenses. The allegations against the Acme Corporation implied that it was responsible to make sure the contractor did not make mistakes or mismanage the project. The claim settled for $595,548.

Risk Factors

Risk Factor #1

Acme Corporation did not have a written and signed contract with the general contractor and it could be argued that contract language could have limited the firm’s liability.

Risk Factor #2

Fast track projects often lead to claims when essential information is missed due to lack of review. See the Management Advisory Fast Track Project Risks on our website.