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A Warning for Government Contractors: Sovereign Immunity

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A recent Georgia appellate court decision serves as a stark reminder to contractors on government projects that sovereign immunity, though frequently disclaimed in the contract, may limit a contractor’s ability to recover. In Fulton County v. SOCO Contracting Co., the contractor (SOCO) entered into a contract with Fulton County (the “County”) for the construction of a local cultural center.  The contract specified that the schedule could be extended and the scope of work could be altered by following the contract’s procedure for change orders, which required a written, bilateral agreement as to such changes.

After delays to the project, the County ordered changes to SOCO’s scope of work, but there was no evidence that such changes were executed through bilateral, written agreements as required by the procedure. SOCO even admitted that the County never issued a written change order extending the contract time or altering the scope. SOCO ultimately brought an action against the County for breach of contract and bad faith performance of the contract. The County asserted that any claims arising from unwritten change orders were barred by the doctrine of sovereign immunity.

In Georgia, the doctrine of sovereign immunity has constitutional status and may be waived only by an act of the General Assembly or the Constitution itself. Sovereign immunity is a threshold issue that must be addressed before the court may reach the merits of a case; the party seeking the benefit of the waiver of sovereign immunity bears the burden of proving such waiver, and whether it has been waived under undisputed facts such as these is a question of law.

The court asserted that although the County did waive sovereign immunity for breach of the written contract, it did not waive sovereign immunity for claims arising from modifications to the written contract that failed to follow the written change order policy outlined in the contract. The court concluded that SOCO provided no evidence that the change order procedure requiring a written change order was followed. The court determined that sovereign immunity could not be waived by the County for actions outside the written contract. Further, the court was unable to create an exception to the rules regarding waiver of sovereign immunity based on any reliance that SOCO may have placed on the County’s request for changes, upon the parties’ course of conduct, or upon facts that were deemed admitted. As a result, the court determined that there was a question of fact as to whether the County waived sovereign immunity and remanded the case for further consideration of whether the parties strictly complied with the contract’s procedure regarding written change orders.

The case highlights the fine distinction between compliance with a written contract and the breach of the terms of a written contract. It further serves as a stark reminder to contractors that the contract terms must be followed strictly to ensure the validity of an argument that the government waived sovereign immunity for breach of contract.

For more, visit www.buildsmartbradley.com.

 

 

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