Articles Posted in Construction Law

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The Department of Agriculture’s Rural Utilities Service (RUS) made a $267 million loan to Open Range to finance construction of wireless broadband networks in 540 RUS-approved markets. Open Range subcontracted with G4S. The FCC suspended a permit, so that Open Range lost the spectrum rights necessary to operate the planned network. RUS gave notice of its intent to terminate remaining funds on the loan unless Open Range could obtain replacement rights. Open Range began failing to meet its obligations to subcontractors. The Secretary of Agriculture made loan money available, provided a press release, and offered to reassure subcontractors, but Open Range was unable to regain the full spectrum rights necessary to complete the original project. RUS and Open Range executed an amendment to reflect a loan amount reduced to $180 million, and 160 RUS-approved markets, but Open Range remained unable to satisfy its debts and filed for bankruptcy. G4S filed suit. The Claims Court held that G4S was not a third party beneficiary to the agreement. The Federal Circuit affirmed, stating that G4S asked that the government incur liability simply because it talked to the individuals in charge of a failing project in an attempt to fix the problems. View "G4S Tech., LLC v. United States" on Justia Law

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In 2003, the VA entered into a contract with Reliable for electrical improvements at a VA medical center, requiring installation of three backup generators, “new and of the most suitable grade.” Federal Acquisition Regulation 52.211-5, incorporated by reference, requires that supplies be “new, reconditioned, or remanufactured,” and defines “new” as “composed of previously unused components.” Reliable sub-contracted to Fisk, which contracted with DTE. In 2004, DTE delivered two Cummins Power Generation generators to the construction site. The VA’s senior resident engineer inspected the generators and determined that they were not “new.” He wrote to Reliable, stating: They show a lot of wear and tear including field burns to enlarge mounting holes. Are they new and will you certify them as such? I cannot pay you … without that certification. Fisk and Reliable initially agreed that the generators did not meet the contract specification. After investigation, they concluded that the generators, manufactured in 2000, had been previously purchased by others but never used. Fisk obtained different generators, which were accepted by the VA. In 2007, Reliable submitted a claim, seeking $1,100,000 for additional costs incurred as a result of rejection of the original generators. In 2013, the Board of Contract Appeals denied Reliable’s claim. The Federal Circuit vacated, holding that the Board erred in its interpretation of the contract. View "Reliable Contracting Grp., LLC v. Dep't of Veterans Affairs" on Justia Law

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In 2004, K-Con entered into a contract with the federal government to construct a Coast Guard building in Port Huron Michigan for $582,641. Once K-Con finished, the government imposed liquidated damages of $109,554 for tardiness of 186 days in completion. KCon sued, seeking remission of the liquidated damages on two grounds—that the contract’s liquidated-damages clause was unenforceable and that KCon was entitled to an extension of the completion date. KCon also requested additional compensation based on work performed in response to government requests that K-Con alleges amounted to contract changes. The Court of Federal Claims held that the contract’s liquidated damages clause was enforceable; that K-Con did not comply with the written-notice precondition for invoking the contract clause governing changes; and that K-Con’s claim for an extension on the completion date must be dismissed for lack of jurisdiction. The Federal Circuit affirmed. K-Con failed to comply with the changes clause, and its after-the-fact speculations about what would have happened had it complied do not create a genuine dispute of material fact regarding whether it should be excused for its failure. View "K-Con Bldg. Sys., Inc. v. United States" on Justia Law

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In 2002, the Navy awarded Metcalf a contract to design and build 212 housing units in Hawaii by October, 2006, for $50 million. Problems arose involving soil conditions. The request for proposals stated that the “soil reconnaissance report” was “for preliminary information only” and required that the contractor conduct independent soil investigation, incorporating 48 C.F.R. 52.236-2, concerning site conditions that differ materially from those disclosed. Discussions delayed construction for a year. Metcalf implemented its preferred changes by over-excavating and using non-expansive fill, without a contract modification. The Navy denied that there was any material difference between pre-bid and post-award soil assessments, but approved some modifications. Metcalf was about 200 days behind schedule and began using “post-tension” concrete, which was more expensive but avoided the additional time and cost of over-excavation. The Navy amended the contract to approve use of post-tension concrete slabs. Metcalf claims additional delays resulting from the presence of more of a chemical contaminant than was expected. With respect to contamination, the Navy granted a 286-day extension and reimbursed $1,493,103. The Navy accepted the buildings in March, 2007. Metcalf alleged that its final cost was $76 million. The government paid less than $50 million. The Claims Court ruled in favor of the government, under the Contract Disputes Act, 41 U.S.C. 7104. The Federal Circuit vacated, holding that the court misconstrued what Metcalf needed to show to prove that the government breached its duty of good faith and fair dealing and misinterpreted certain contractual provisions. View "Metcalf Const. Co., LLC v. United States" on Justia Law

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In 2001 KBR agreed to provide the Army with logistics support services during Operation Iraqi Freedom. Individual task orders required KBR to install, operate and maintain dining services near Mosul, Iraq on a cost-plus-award-fee basis. KBR selected ABC, a subcontractor, to build a prefabricated metal dining facility and to provide dining services for a camp population of 2,573. In June 2004, the Army ordered KBR to stop construction of the metal facility and begin construction of a reinforced concrete facility for an estimated 2,573 to 6,200+ persons. Instead of requesting bids for the new work, KBR kept ABC as the subcontractor due to the urgency of the request. ABC submitted a new proposal with a total monthly cost about triple the monthly cost initially quoted. ABC attributed the increased costs to additional labor and equipment to serve a larger population and to a drastic increase in the cost of labor and a severe shortage of staff willing to work in Iraq. Due to a calculation error, it was determined that ABC’s proposal was reasonable. KBR’s management reviewed and approved a change order, embodying ABC’s proposal. In 2005 the subcontract ended and title to the dining facility passed to the Army. In 2007, the Defense Contract Auditing Agency suspended payment of certain costs paid by KBR to ABC pursuant to the change order. KBR prepared a new price justification for the concrete dining facility and ultimately filed suit, seeking recovery of the $12,529,504 in costs disapproved for reimbursement. The Claims Court awarded $6,779,762. The Federal Circuit affirmed. View "Kellogg Brown & Root Servs. v. United States" on Justia Law

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In 2006, the Federal Bureau of Prisons issued a Request for Proposals for the “design-build” construction of a federal correctional institution. The project involved a “cut-to-fill” site, meaning that the ground had to be leveled by excavating materials from one area of the site and using those materials to fill lower areas. Based on information in the solicitation documents and prior experience, BH believed the New Hampshire Department of Environmental Sciences would approve a permit for a one-step-cut-to-fill construction plan and calculated its bid price, $238,175,000, accordingly. The contract provided liquidated damages of $8,000 for each day completion was overdue. The NHDES rejected the application. BH advised the government of the implications of NHDES restrictions, but did not refuse to proceed or request that the government intervene with the NHDES. According to BH, the restrictions were contrary to generally accepted industry practice. Upon completion of cut-to-fill operations, BH submitted a Request for Equitable Adjustment, seeking $7,724,885 for excess costs. The Contracting Officer and the Claims Court rejected the request, finding that the Permits and Responsibilities clause placed the burden of obtaining and complying with state and local permits on BH “without additional expense to the Government;” that BH had not alleged violation of the implied duty of good faith; and that, because the government did not control the NHDES, there was no basis for imposing liability for constructive change. The Federal Circuit affirmed. View "Bell/Heery v. United States" on Justia Law

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Kahrs imports engineered wood flooring panels for distribution to flooring wholesalers. Kahrs classified the products as “assembled parquet panels” under the Harmonized Tariff Schedule of the United States (HTSUS) subheading 4418.30.00, a duty-free provision for “Builders’ joinery and carpentry of wood, including cellular wood panels and assembled parquet panels; shingles and shakes: parquet panels.” Customs subsequently liquidated Kahrs’ merchandise under HTSUS 4412, which covers “plywood, veneered panels and similar laminated wood,” at a duty rate of eight percent ad valorem. Customs denied a protest and the Court of International Trade found that Customs correctly classified Kahrs’ merchandise as plywood under heading 4412. The Federal Circuit affirmed. View "Kahrs Int'l, Inc. v. United States" on Justia Law

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In 2003, the company entered into contracts with the government for roof repairs of two government buildings. Due to delays the projects were not completed and accepted by the government until September and October 2005. At the time, Federal Acquisition Regulations required that a performance report be prepared for each construction contract for $550,000 or more, 48 C.F.R. § 36.201. The company received negative interim performance evaluations from the resident engineer for both projects in February, 2004. In March, 2006, the resident engineer issued proposed negative final performance evaluations for both projects. The company protested the proposed evaluations, asserting that subcontractors and other problems, beyond its control, caused the delays. In final performance evaluations, the engineer assigned an overall performance rating of unsatisfactory and assigned unsatisfactory ratings for each project in 15 individual categories. The contracting officer issued a final decision that the unsatisfactory performance appraisal was justified. The Claims Court rejected the company's suit. The Federal Circuit affirmed. A contractor is responsible for the unexcused performance failures of its subcontractors and the complaint did not allege facts that would excuse the delays.

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A contractor, renovating military housing, obtained a performance bond under the Miller Act (40 U.S.C. 3131 (b)) and abandoned the project after completing 12 percent of the work. The government had paid 40 percent of the contract price. The surety contracted for completion, but the second contractor discovered code violations and incurred penalties for late completion. Costs were reimbursed by the surety, which filed suit under the Tucker Act, 28 U.S.C. 1491. The Federal Circuit held that the Claims Court lacked jurisdiction. The court previously held that the Claims Court has jurisdiction under the Act over sureties' claims based on a theory of equitable subrogation; this case does not involve equitable subrogation because the government made payments at issue before receiving notice of the contractor's default. The waiver of sovereign immunity under the Act does not extend to impairment of suretyship claims apart from the theory of equitable subrogation. The Contract Disputes Act, 41 U.S.C. 601, applies to a surety's claim against the government arising from a takeover agreement between the government and surety for completion of a bonded contract following the principal obligor’s default; the surety failed to satisfy CDA jurisdictional prerequisites.

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The United States Army Corps of Engineers awarded the company a contract for construction of a government hospital at Fort Benning. Two rival bidders each filed a bid protest with the Government Accountability Office, which recommended that the contract be re-procured without the company's participation. The GAO found organizational conflict of interest, focusing on the potential for access to nonpublic information and had concluding that the company had access to special knowledge of the Army's requirements that would give unfair advantage. The Army announced that it would follow the GAO recommendation and terminated the contract. The Court of Claims ordered reinstatement and the Federal Circuit affirmed. The Claims Court applied the correct standard of review in concluding that the termination was unreasonable. Th GAO identified no facts to indicated that the company actually had access to specific, sensitive information.