Southern Electrical Services, Inc. v. City of Houston
355 S.W.3d 319 | Texas Court of Appeals, 1st District (Houston) | 2011
What This Case Means for Subcontractors
Southern Electrical Services bid on a Houston airport project using prevailing wage rates provided by the City. When the City later provided corrected (higher) minimum wage rates, SES claimed damages for increased labor costs. The Texas Court of Appeals ruled against SES, finding that the contract did not shift the risk of wage rate changes to the City, and that the rates were minimums only—SES could have paid more if needed. Subcontractors cannot rely on initial wage information from government clients to lock in labor costs without explicit contract language protecting them.
Key Takeaways
- •Always include explicit contract language that allocates risk of prevailing wage rate increases to the party providing the rates (usually the government client). Without it, you bear the cost.
- •Prevailing wage rates are minimums, not caps. Budget conservatively and assume rates may increase during the project—do not bid assuming rates will stay flat.
- •When bidding government work, get wage rate confirmation in writing as part of the final contract, not just in bid documents. Bid documents alone do not create enforceable obligations on the government.
The contract did not allocate the risk of increased costs to the City.
Frequently Asked Question
Can I sue the government for damages if prevailing wage rates increase after I bid the job?
Not unless your contract explicitly states the government bears the risk of wage rate increases. Courts treat prevailing wage rates as minimums only, not fixed costs. You must negotiate contract language that protects you from rate increases, or budget for potential increases when you bid.
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