The $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) is poised to change how the United States views and implements public-private partnerships (P3s). At a high level, the IIJA encourages public entities to consider P3s and incentivizes private entities to engage in the P3 market by dismantling roadblocks that have prevented the widespread adoption of P3s in the U.S. — including by removing government red-tape, increasing the availability of federal funding, and delivering much needed technical expertise and guidance to successfully execute P3s. In this article, the first in a series, we explore (1) the doubling of private activity bonds, (2) a P3 technical assistance program for government agencies, (3) TIFIA driven value-for-money analyses, (4) the streamlining of important environmental reviews, and (5) the creation of a government reporting feedback loop on P3 projects.
Court of Appeals of Michigan Holds Contractor Cannot Recover Eichleay Damages from Supplier Absent Contractual Right and Proof that Delay in Delivery Caused an Actual Loss
ITT Water & Wastewater USA, Inc. v. L. D’Agostini & Sons, Inc., 2016 Mich. App. LEXIS 579 (March 17, 2016)
This action arises out of a contract dispute between plaintiff, ITT Water & Wastewater USA, Inc. (“ITT”), and defendant, L. D’Agostini & Sons, Inc./Lakeshore Engineering Services, Inc. Joint Venture (“D’Agostini”), related to ITT’s supply of eight water pumps to D’Agostini on a project to construct a sanitary and storm water treatment and pumping station. D’Agostini filed a counterclaim against ITT, alleging that ITT’s late pump delivery delayed the project by 103 days. The trial court granted ITT’s motion for partial summary disposition and ruled that D’Agostini could not rely upon the Eichleay formula for determining its alleged home office overhead damages. The parties then dismissed, without prejudice, the remaining claims and D’Agostini appealed.
Texas Court of Appeals Holds that Economic Loss Doctrine Does Not Bar Building Owner’s Negligence Claims Against Geotechnical Engineer
USA Walnut Creek, DST v. Terracon Consultants, Inc. f/k/a HBC Engineering, Inc., 2015 Tex. App. LEXIS 1806 (Tex. App. 2015)
This cases arises out of the construction of a twelve building apartment complex in Austin Texas. The builders, Creekstone Walnut, LP and Creekstone Builders, Inc., contracted with defendant Terracon for geotechnical engineering and inspection services. As part of the services, Terracon performed test borings and provided the geotechnical recommendations for, among other things, the foundation design. Terracon’s inspection services included providing testing and inspection of the construction materials, including compaction testing on the earthwork.
Federal District Court in Missouri Holds Contractor’s Failure to Declare Subcontractor in Default Bars Recovery on Performance Bond (Earlier Decision Vacated)
Curtiss-Manes-Schulte, Inc. v. Safeco Insurance Company, 2015 U.S. Dist. LEXIS 57836 (W.D. Mo. May 4, 2015)
In this opinion, the United States District Court for the Western District of Missouri (i) vacated its earlier order denying the surety’s motion for summary judgment (see earlier post) and (ii) held that the contractor’s failure to formally declare the sub-contractor in default precluded the contractor from recovering from the subcontractor’s performance bond surety. The dispute involved the contractor, Curtiss-Manes-Shulte, Inc. (“CMS”) and Safeco Insurance Company of America (“Safeco”), who provided a performance bond to Balkenbush, CMS’s mechanical subcontractor.
Federal District Court Holds that General Contractor’s Failure to Provide Notice of Default Does Not Preclude Recovery on Performance Bond
Curtiss-Manes-Schulte, Inc. v. Safeco Insurance Company, 2015 U.S. Dist. LEXIS 10032 (W.D. Mo. 2015)
NOTE: THIS DECISION WAS VACATED ON REHEARING AND THE DECISION ON REHEARING WILL BE THE SUBJECT OF A POST TO BE PRESENTED SHORTLY IN CONSTRUCTLAW.
This dispute between a general contractor and its subcontractor’s performance bond surety arose out of a renovation project at Fort Leonard Wood in Missouri. On October 19, 2010, the general contractor, Curtiss-Manes-Schulte, Inc. (“CMS”), entered into a subcontract with Balkenbush Mechanical, Inc. to replace the air conditioning system on the project. A week later, Balkenbush obtained the required performance bond from Safeco Insurance Company of American.
By October 2011, CMS knew that Balkenbush was behind schedule. In July 2012, CMS responded to a Contract Bond Status Inquiry and informed Safeco that the contract was not complete, that Balkenbush’s work was not progressing satisfactorily, that the project was nine months late, and that liquidated damages would be assessed. Around the same time, Safeco hired consultants and a law firm to investigate, defend and resolve claims made against four performance bonds Safeco issued to Balkenbush on other projects. In December 2012, Safeco filed a lawsuit against Balkenbush to recover its losses resulting from the claims on the four other performance bonds. One month later, in January 2013, Balkenbush filed a bankruptcy petition and Safeco’s counsel entered their appearance in that proceeding.
Connecticut Supreme Court Construes “Active Interference” Exception to “No-Damage-for-Delay” Clause
C&H Electric, Inc. v. Town of Bethel, 312 Conn. 843, 2014 Conn. LEXIS 263 (Aug. 5, 2014)
This dispute arose out of a project to renovate and build an addition at a high school in the Town of Bethel, Connecticut. The plaintiff, C&H Electric, entered into a contract with the defendant, the Town of Bethel, to perform the electrical work on the project. The parties’ contract included a “no damages for delay” clause, limiting the defendant’s liability for delays it caused on the project. The no damages for delay clause specified that an extension of time would be plaintiff’s “sole remedy” for “(1) delays in the commencement, prosecution or completion of the work, (2) hindrance or obstruction in the performance of the work, (3) loss of productivity, or (4) other similar claims whether or not such delays are foreseeable, contemplated, or uncontemplated . . .” The contract included a single exception to the no damages for delay clause, which allowed the plaintiff to recover for delays caused by acts of the defendant “constituting active interference with [the plaintiff’s] performance of the work.” While the contract did not define “active interference,” it did specify that the defendant’s exercise of its contractual rights, including its right to suspend, reschedule or change the work, would not constitute “active interference.”
Fifth Circuit Holds Contractor May Not Assert Set-Off for Defective Work Because It Failed to Comply with Subcontract Provisions for Notice and Opportunity to Cure
United States ex rel JEMS Fabrication, Inc. v. Fidelity & Deposit Co. of Maryland, 2014 U.S. App. Lexis 8175 (5th Cir., April 30, 2014)
This dispute arises out of a construction project to renovate and redevelop pumping stations located at various sites along the Mississippi River. The U.S. Corp of Engineers entered into a contract with Benetech, LLC for the project. Benetech then entered into a subcontract with plaintiff JEMS, whereby JEMS agreed to supply custom-fabricated structural steel for use on the project. The contract amount, including approved change orders, was $2.38 million and required JEMS to provide shop drawings, materials and on-site labor.
JEMS delivered all of the shop drawings and most of the materials required by the subcontract. However, JEMS did not supply most of the on-site labor, as Benetech and JEMS agreed that Benetech would supply the labor to satisfy its self-performance obligations in its contract with the Corp of Engineers. JEMS and Benetech also agreed to a subcontract modification such that Benetech would purchase a custom building directly from JEMS’ subcontractor for $54,000. However, because of changes made by the Corp of Engineers, which were not incorporated into the subcontract, Benetech’s cost for the custom building was $147,000. Ultimately, Benetech paid JEMS just under $1 million for its work on the project and alleged that JEMS was not entitled to any additional payment. Benetech claimed that it was entitled to a set-off against any amount due under the subcontract because it had to purchase materials that JEMS should have supplied for the project.
Federal District Court for DC Rejects Subcontractor’s Pass-Through of General Contractor’s Claim to Sub-Subcontractor
Window Specialists, Inc. v. Forney Enterprises, Inc.,
2014 U.S. Dist. LEXIS 2014 U.S. Dist. LEXIS 34702 (D.D.C. March 18, 2014)
This dispute arises out of a construction contract to repair property at Fort McNair in Washington, D.C. The Army contracted with a general contractor, IIU Consulting Institute, who in turn contracted with defendant subcontractor, Forney Enterprises. Forney entered into a sub-subcontract with plaintiff Window Specialists, Inc. for the labor and materials to supply and install over 680 windows and over 60 doors on the project. During the course of the project, the Army issued a 10-day cure notice identifying numerous issues with the general contractor’s demolition of existing windows and Window Specialists’ installation of new windows. Ultimately, Forney terminated the contract with Window Specialists and the general contractor had to demolish, re-order, and re-install all of Window Specialists’ work on the project.
Window Specialists filed suit against Forney, the general contractor, the general contractor’s payment bond surety, and the Secretary of the Army, bringing claims for breach of contract, unjust enrichment, a payment bond claim, and for injunctive relief. Forney filed two counterclaims against Window Specialists, one for breach of contract and one seeking indemnification related to the costs the general contractor incurred replacing Window Specialists’ work.
Texas Appeals Court Reverses Jury Verdict for Owner, Holding Owner’s Repair of Allegedly Defective Expansion Joint Without Allowing Contractor to Inspect for Conformity to Design Constituted Spoliation
Miner Dederick Constr., LLP v. Gulf Chemical & Metallurgical Corp.
2013 Tex. App. LEXIS 4589 (Tex. App. April 11, 2013)
Gulf Chemical & Metallurgical Corporation (“Gulf”) hired Miner Dederick Construction, LLP (“Miner”) in May 2005 to construct an addition to a hazardous waste containment building. The addition, designed by a third-party engineer, included a 140-foot expansion joint between the existing and new foundations. Due to the hazardous materials stored in the facility, the expansion joint included a specialty sealant system and was designed prevent fluid leakage. Miner completed construction in January 2006, but by June 2006 Gulf discovered leakage through the expansion joint.
Gulf requested that Miner implement the engineer’s design for repairing the expansion joint under the contract warranty provisions. Miner refused, claiming that it installed the expansion joint per the original design and the repair was a redesign. Gulf bid the repair work and hired a different contractor to repair the expansion joint.
Mississippi Court of Appeals Reviews Relationship Between Actual Damages for Delay and Liquidated Damages
Hovas Constr., Inc. v. Western Line Consolidated School Dist.
2012 Miss. App. LEXIS 556 (September 14, 2012)
The Board of Trustees of Western Line Consolidated School District entered into a $450,000 contract with Hovas Construction, Inc. for an addition and renovation work at the O’Bannon High School in Washington County, Mississippi. The contract required that the project achieve substantial completion by June 6, 2008 and included a project delay liquidated damages provision providing for damages of $500 per day. The project achieved substantial completion on July 15, 2008, thirty-nine days late, and the School District withheld $19,500 from Hovas as substantial completion liquidated damages. Hovas filed suit in the Circuit Court of Washington County. The Circuit Court concluded the $19,500 withheld was appropriate because the liquidated damage provision was enforceable and that the School District suffered actual damages.