Government Contracts

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RDA Constr. Corp. v. United States, No. 11-555 C, 2017 U.S. Claims LEXIS 875 (Fed. Cl. July 27, 2017)

This case arises out of a public construction project at the Newport Naval Station.  The Naval Facilities Engineering Command (“NAVFAC”) contracted with RDA Construction (“RDA”) for the demolition, removal and reconstruction of a fifty-year-old deteriorating wharf and bulkhead.  The wharf was supported by 248 steel H-pile beams, encased in concrete and driven into the sea floor.  In 2005, NAVFAC commissioned the Appledore Report which found that these structures exhibited advanced deterioration, much of which could only be observed during underwater inspection and could not support any vehicular loads.  A second report, commissioned in 2008, recommended that the structure not be used during its reconstruction.

In May 2009, NAVFAC issued its project solicitation but did not disclose these reports or their findings.  Instead, NAVFAC invited bidders to the site and encouraged them to investigate it carefully.  Hazardous site conditions were marked with sawhorses, barriers and fencing.  After visiting the site, RDA submitted its bid and was identified as the apparent low bidder.  Two days later, NAVFAC notified RDA that its bid was “substantially lower” than NAVFAC’s estimate and requested that it review and confirm its bid and the scope of work.  RDA assured NAVFAC that it had made no mistakes and would honor its bid.  RDA then provided its technical and management plans to NAVFAC, noting that it planned to perform demolition work from the wharf using land-based equipment.  After receipt of these plans, NAVFAC awarded the contract to RDA; RDA signed the contract on October 13, 2009 and received its Notice to Proceed two days later.  In November, at a pre-construction meeting, RDA again explained its plan to use the wharf during construction as a staging area for its excavators and demolition equipment.  NAVFAC personnel were “shocked” by this plan because the wharf was “condemned”  and subsequently provided RDA with the Appledore report.

Balfour Beatty Infrastructure, Inc. v. Mayor and City Council of Baltimore, 2017 U.S. App. Lexis 7252 (4th Cir., April 25, 2017)

The United States Court of Appeals for the Fourth Circuit recently addressed whether the City of Baltimore (the “City”) had abandoned a contractually required administrative dispute resolution process and relieved Balfour Beatty Infrastructure, Inc. (the “Contractor”) of any obligation to use the administrative dispute resolution process before seeking judicial review of the Contractor’s claims.

The City and the Contractor entered into two contracts (the “Contracts”) whereby the Contractor agreed to build certain parts of a wastewater treatment plant servicing the Chesapeake Bay. The Contracts stipulated that time was of the essence and permitted the City to assess liquidated damages if the Contractor failed to meet the specified completion date.  The Contracts also incorporated by reference the administrative dispute resolution process set forth in the City’s “Department of Public Works Specifications – Materials, Highways, Bridges, Utilities and Incidental Structures 2006,” known as the “Green Book,” which requires contractors engaged by the City in connection with public works projects to seek administrative review by the City’s Department of Public Works of any dispute related to their contracts before suing in court.

United States v. Int’l Fid. Ins. Co., No. 16-0472-WS-C, 2017 U.S. Dist. LEXIS 16791 (S.D. Ala. Feb. 7, 2017)

This action arose out of a payment dispute between Bay South Limited, Inc. (“Bay South”) and Stephens Construction & Concrete, Inc. (“Stephens”). Bay South entered into two subcontracts with Stephens, whereby Bay South agreed to furnish labor and materials to Stephens on two federal construction projects.  In connection therewith, International Fidelity Insurance Company (“Fidelity”) issued payment bonds (the “Bonds”) to Stephens.  Bay South filed a complaint in federal court to assert claims against the Bonds under the Miller Act (40 U.S.C. §3133), as well as other claims.  Stephens sought to compel arbitration of Bay South’s claims, pursuant to the arbitration provision in the subcontracts, which provided:

“In the event of a dispute arising between [Stephens] and [Bay South] under the Subcontract Agreement, the dispute shall be settled by arbitration in accordance with the Construction Industry Rules of the American Arbitration Association then in effect …”

Bay South argued that the 1999 Amendment to the Miller Act prohibits such claims from being arbitrated, and, in the alternative, even if these claims may be arbitrated generally, Bay South’s specific claims are not subject to arbitration because they are not within the scope of the parties’ arbitration agreement.

United States ex rel. J.A. Manning Constr. Co. v. Bronze Oak, 2017 U.S. Dist. LEXIS 6054 (N.D. Okla. Jan. 17, 2017)

 In May 2014 the Cherokee Nation issued a bid notice for bridge and roadway construction in Mayes County, Oklahoma (the “Project”). Funding was authorized pursuant to the Secretary of Transportation and Secretary of the Interior’s Tribal Transportation Program, 23 U.S.C. § 202, by which federal funding is offered to Native American tribal governments to pay the costs of certain transportation projects located on, or providing access to, tribal lands.

Bronze Oak, LLC submitted a bid proposal and was hired as the general contractor for Project, and J.A. Manning Construction Company (“JAMCC”) was hired as a subcontractor to supply labor and materials to the Project. Bronze Oak’s bid proposal provided that any resulting contract would be construed under U.S. and Cherokee Nation laws.  A payment bond was issued for the Project naming Bronze Oak as the principal, Mid-Continental Casualty Company as surety, and the United States as obligee.  The payment bond also stated it was for the protection of persons supplying labor and materials pursuant to the Miller Act.

Tri-State Elec., Inc. ex rel. Apex Enters. v. Western Sur. Co., 1:14-CV-00245, 2017 U.S. Dist. LEXIS 4974 (D. Idaho Jan. 11, 2017)

The United States Department of Veterans Affairs (the “VA”) contracted with Sygnos, Inc. (“Sygnos”) for improvements to the electrical system at a VA hospital in Boise, Idaho. Sygnos subcontracted a portion of the work to Apex Enterprises, Inc. (“AEI”), who in turn subcontracted a portion of its work to Tri-State Electric, Inc. (“Tri-State”).  Delays plagued the project from the outset, and the work – originally scheduled for completion in 240 days – ultimately took more than 950 days to perform.  Disputes concerning responsibility for and the amount of delay damages ensued.

Sygnos submitted a request for equitable adjustment to the VA as a result of the delays. Receiving no timely response from the VA, Sygnos converted the request for equitable adjustment to a claim for delay damages under the Contract Disputes Act, which the VA and Sygnos settled for $645,000.  AEI and Tri-State subsequently sued Sygnos for delay damages they incurred on the project.  Sygnos did not dispute that AEI and Tri-State had suffered delays but it disputed some categories of damages claimed and cited the no-damage-for-delay clause in Tri-State’s contract as barring its claims.

Allstate Insurance Company v. Structures Design/Build, LLC, 2016 U.S. Dist. LEXIS 34349 (WD VA March 17, 2016)

This construction dispute case arises from a failed pipe connector that caused water damage to a facility and insured personal property, which Hillel at Virginia Tech, Inc. (“Hillel”) owned in Blacksburg, Virginia. Hillel contracted Structures Design/Build, LLC (“Structures”) to design and construct the facility. Structures, in turn, subcontracted PJ Little Plumbing, Inc. (“PJ”) for plumbing and mechanical installation. PJ purchased the failed pipe connector from CMC Supply, Inc. (“CMC”). Allstate Insurance Company (“Allstate”) insured Hillel for the damage to the facility and the personal property.

As Hillel’s subrogee, Allstate filed a complaint against Structures and PJ. Allstate sued Structures for various state law claims. It sued PJ for negligence and breach of express and implied warranties. PJ filed a third-party complaint to join CMC on a breach of implied warranty theory. PJ and CMC moved to dismiss the claims against them.

United States ex rel Jack Daniels Construction, Inc. v. Liberty Mutual Insurance Company, 2015 U.S. Dist. LEXIS 172189 (M.D. Fla. Dec. 28, 2015)

This action arises from the construction of the Joint Intelligence Technical Training Facility at Goodfellow Air Force Base in San Angelo, Texas (the “Project”).  Plaintiff Jack Daniels Construction, Inc. (“Jack Daniels”) was a sub-subcontractor who was retained by the subcontractor, Ragghianti Foundations III, Inc. (“Ragghianti”), to perform certain concrete work at the Project.  Jack Daniels commenced its work on the Project in late August of 2011, but it was demobilized by early September as a result of problems encountered by Ragghianti and the prime contractor.  Jack Daniels resumed its work in late October, but by November of 2011, the Project was behind schedule.

Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 226 Md. App. 420, 130 A.3d 1024, 2016 Md. App. LEXIS 3 ( Md. Ct. Spec. App. Jan. 28, 2016)

The City of Baltimore retained a design professional, Rummel Klepper & Kahl (“RK&K”), to produce a design for construction of a wastewater treatment plant.  The City then invited bids for construction of the plant, and contractor Balfour Beatty Infrastructure (“Balfour Beatty”) was the successful bidder.  RK&K and Balfour Beatty each had a separate contract with the City, but did not have a contract with one another.  After alleged defects in RK&K’s design caused Balfour Beatty to incur delays and increases to the cost of its work, it sued RK&K, but not the City.

City of Whiting, Indiana v. Whitney, Bailey, Cox, & Magnani, LLC, 2015 U.S. Dist. LEXIS 150229 (N.D. Ind. Nov. 5, 2015)

The City of Whiting, Indiana (the “City”) contracted with American Structurepoint, Inc. (“Engineer”) to design a lakefront park that would protect its shoreline from erosion (the “Project”).  Engineer subcontracted with Whitney, Bailey, Cox, & Magnani, LLC (“Subconsultant”) to serve as the marine engineer for the Project (the “Subcontract”).  Pursuant to the Subcontract, Subconsultant designed a revetment to protect the Project shoreline.  The revetment failed, damaging the City’s property and necessitating remediation.

Elliot-Lewis Corp. v. Skanska USA Building, Inc., 2015 U.S. Dist. LEXIS 98405 (E.D. Pa. July 27, 2015)

This dispute arises out of a major renovation and expansion of the Franklin Institute in Philadelphia (the “Project”).  Plaintiff Elliot-Lewis Corporation (“ELCo”) was a subcontractor hired to install the piping and controls for the Project’s heating, ventilation and air conditioning (“HVAC”) system.  The Project’s schedule required that start up and testing of the HVAC system begin by February 23, 2013 and that the system be operational by April 1, 2013.  But, when the HVAC was started for testing, flooding issues arose due to problems with the condenser pumps specified in the HVAC system’s specifications.  Ultimately, the HVAC system was not operational by April 1 and ELCo was required to perform additional work and install temporary cooling equipment so that the Franklin Institute could open during the summer.  ELCo was never paid by the prime contractor for this additional work.