Subcontracting is often the best way to complete a complex project. A subcontractor may have technical expertise, equipment, or human resources that are unavailable to the prime contractor. But assigning work to one or more lower-tier parties carries with it a certain amount of risk. One of the challenges is allocating liability for changes in the scope of work, delays, and other inefficiencies that increase a subcontractor’s cost or time for performance. Today we look at how the allocation of this risk is affected by the Severin doctrine.
The Severin doctrine takes its name from the decision in Severin v. United States, 99 Ct. Cl. 435 (1943). Severin employed a subcontractor on a contract to build a post office in Rochester, New York. As a result of construction delays, Severin sought to recover $702 on behalf of its subcontractor.
The Court of Claims (now the Court of Federal Claims) gave two reasons for rejecting the claim. First, the court held that the subcontractor could not sue on its own because it had no contract directly with the government. The government had waived its sovereign immunity only for its direct contractual agreements.
Second, the court held that Severin could not pursue a claim on the subcontractor’s behalf because Severin itself could not be held liable for the same damages under its subcontract agreement.
A strict application of the Severin doctrine would increase risks for both prime contractors and subcontractors and would hamper the efficient resolution of claims. It would restrict the use of no-damage-for-delay clauses and other risk-shifting clauses that have widely been seen as effective. But in practice, the Severin doctrine has not been strictly enforced.
Continue Reading Lessons learned from 71 years of the Severin doctrine