Kansas committee hears debate over mutual waivers of consequential damages in public construction contracts

Committee staff told the Senate Commerce Committee that Senate Bill 335 would amend the Kansas Fairness and Public Construction Contract Act to require public construction contracts to include a mutual waiver of consequential damages "substantially in the form" provided in the bill, and staff noted the language is in the bill text and bill brief.

Senator Tim Schallenberger, who introduced the bill, and several industry witnesses said the change would standardize risk allocation and protect competition for public projects. "These clauses were starting to appear in these public contracts that were not in the best interest of, in my opinion, the state or the contractors," Schallenberger said, describing constituent concerns that led to the bill.

Gina Atterberry, general counsel for Crossland Construction Company, described a recent Kansas project in which the public owner initially sought to retain the right to consequential-damage claims "up to $50,000,000" on a $24,000,000 contract where Crossland was getting a roughly 2 percent fee. Atterberry asked, "How do you ask a contractor to price a project where one claim on this project could wipe out his entire company?" She said the proposed mutual-waiver language aligns with standard industry forms (AIA A201, 2017) and that liquidated damages, insurance and performance/payment bonds remain available to owners.

Supporters — including the Associated General Contractors of Kansas and the Kansas Chamber — argued the waiver would reduce undefined risk that can raise bid prices, promote competition from small and medium contractors, and reduce litigation. Mike Gibson of the Associated General Contractors said the change is common in other states and would make Kansas more competitive when public and private entities partner on economic development projects.

Opponents, led by John Goodyear, general counsel for the League of Kansas Municipalities, urged caution. Goodyear said the bill "prohibits our ability to negotiate terms that reflect the unique risks, responsibilities, and circumstances of an individual project" and warned that municipalities should retain the ability to tailor contract remedies to specific projects where consequential damages may be the only appropriate remedy.

Committee members asked whether the bill applies to residential projects and whether the DA-146A form and prior bills affected current practice. Staff clarified the bill applies to contracts for public construction where the owner is a public entity (including state, cities, counties, school districts and other listed government entities). Several proponents said experience with the DA-146A form and owner practices has prompted the bill; opponents suggested narrower, form-specific fixes could address some concerns without a broad statutory restriction.

The committee closed the hearing on SB 335 without taking a recorded committee vote. The chair announced upcoming items on the committee calendar, including a joint House-Senate Commerce meeting on unemployment insurance modernization and a hearing on an angel investor tax-credit extension.