Justia Government Contracts Opinion Summaries

After Rio School District’s new school was completed, the District and its general contractor (FTR) engaged in a decade-long legal battle, resulting in a judgment for FTR exceeding $9 million. Public Contract Code section 7107 allows a public entity to withhold funds due a contractor when there are liens on the property or a good faith dispute concerning whether the work was properly performed. The trial court assessed penalties against District because it did not timely release the retained funds. The court of appeal affirmed in part. A dispute over the contract price does not entitle a public entity to withhold funds due a contractor; the doctrine of unclean hands does not apply to section 7107; the trial court properly rejected the District's action under the False Claims Act, Government Code section 12650 and properly assessed prejudgment interest, subject to adjustment for any extra work claims found untimely on remand. The trial court erred in its interpretation of a contract provision imposing time limitations to submit the contractor's claims for extra work as requiring a showing of prejudice and erred in awarding fees for work not solely related to FTR's section 7107 cause of action. View "East West Bank v. Rio School Dist." on Justia Law

Bannum protested decisions of the Bureau of Prisons of the U.S. Department of Justice to award two contracts to other bidders, alleging a common defect in the terms of the solicitations and problems in the evaluation of competing bids. Bannum cited a requirement of compliance with Prison Rape Elimination Act of 2003, 42 U.S.C. 15601–15609 and the government’s failure to provide pricing information with respect to the requirement. In each case, the Court of Federal Claims dismissed Bannum’s suit. Finding that Bannum’s proposal, by failing to commit Bannum to a fixed price, was materially out of compliance with the terms of the solicitation, the court concluded that Bannum was not an “interested party” entitled to bring its protest under 28 U.S.C. 1491(b). The Federal Circuit affirmed in consolidated appeals, holding that, because Bannum did not adequately present its objection to the solicitations before the awards, Bannum waived its ability to challenge the solicitations. On appeal, Bannum failed to preserve its separate challenges to the bid evaluations. View "Bannum, Inc. v. United States" on Justia Law

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

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

Lydig Construction was the general contractor on a large public works project. Martinez Steel was the original steel supply subcontractor on the project. Lydig sued Martinez for additional costs Lydig incurred because Martinez failed to timely supply steel for the project; Lydig, with the public agency's approval, had been required to replace Martinez as the steel supplier. Lydig moved for a right to attach order and a writ of attachment and presented the trial court with its business records and declarations from its employees. Martinez opposed Lydig's motion and presented declarations from one of its employees that set forth its contention Lydig owed it for, among other items, steel Martinez had delivered to the project. Martinez filed a cross-complaint in which it alleged claims that, if successful, would entirely offset Lydig's claims against it. The trial court granted Lydig's motion and issued writs of attachment in the amount of $203,315. The court of appeal affirmed, rejecting Martinez's contentions that its cross-complaint, as a matter of law, prevented the trial court from issuing a writ of attachment against it and that Lydig's application for a writ of attachment was not supported by substantial evidence. View "Lydig Constr., Inc. v. Martinez Steel Corp." on Justia Law

The Forest Service awarded EM Logging a timber sale contract for the Kootenai National Forest in Montana. The contract’s load limit clause states that “[a]ll vehicles shall comply with statutory load limits unless a permit from the Forest Service and any necessary State permits are obtained,” the haul route clause states that “[a]ll products removed from Sale Area shall be transported over the designated routes of haul” and a notification clause requires that “Purchaser shall notify Forest Service when a load of products … will be delayed for more than 12 hours in reaching weighing location.” The provision under which the Forest Service terminated the contract refers to: “a pattern of activity that demonstrates flagrant disregard for the terms of this contract.” The Forest Service issued multiple notifications of breach with respect to the clauses, suspended operations, and terminated the contract. The Federal Circuit reversed, finding that one instance of route deviation necessitated by illness, one load limit violation, and two instances of delayed notifications. None of the alleged violations independently substantiated the finding of flagrant disregard. Even together, the violations were not substantial evidence of a pattern of activity demonstrating that EM’s actions were in flagrant disregard of the contract. View "EM Logging v. Dep't of Agric." on Justia Law

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

FTR has constructed buildings for public entities for 15 years. In 1999, FTR submitted the winning bid of $7.345 million to construct a District school. During construction, FTR submitted approximately 150 proposed change orders (PCO). FTR claimed some were necessary because the District’s plans were inadequate or misleading. The District denied most of the PCOs on the grounds that the work was covered under the basic contract, the amounts claimed were excessive, or that a PCO was not timely under the contract. Construction was completed in 2001. Public Contract Code 7107 allows a public entity to withhold funds due a contractor when there are liens on the property or a good faith dispute concerning whether the work was properly performed. The court of appeal held that the trial court properly assessed penalties against District because it did not timely release retained funds; properly rejected the District's action under the False Claims Act, Government Code 12650; and properly assessed prejudgment interest. The court erred in its interpretation of a contract provision imposing time limitations to submit claims for extra work as requiring a showing of prejudice and erred in awarding fees for work not solely related to FTR's section 7107 cause of action. View "FTR Int'l, Inc. v. Rio Sch. Dist." on Justia Law

The Los Angeles Memorial Coliseum Commission and Los Angeles Memorial Coliseum Association alleged that defendants, who promoted and staged music events at the Coliseum and related venues, paid an employee of the Commission for services related to those music events and that such payments were inappropriate and not disclosed to plaintiffs. The trial court dismissed. The court of appeal reversed in part, finding that the plaintiffs adequately stated causes of action under the conflicts of interest prohibition in Government Code section 1090, conspiracy to defraud, violation of the Unfair Competition Law (UCL), and accounting. The court upheld dismissal of claims of violation of the False Claims Act, fraud, and negligence. View "Los Angeles Mem'l Coliseum Comm'n v. Insomniac, Inc." on Justia Law

The School District entered into a construction contract with Amoroso. Pursuant to Public Contract Code 22300, Amoroso elected to have the retention held in an escrow account in the form of securities. The escrow agreement stated that “District shall have the right to draw upon the securities and/or withdraw amounts from the Escrow Account in event of default by Contractor as determined solely by District.” The District gave written notice of material breach on March 30, 2011, based on Amoroso’s failure to complete, timely or at all, any of the three project phases and requested that Amoroso cure by April 4. Amoroso contested the assertions of material breach by letter dated April 1. The District sent notice of termination on April 18 and filed suit. On April 28, the parties entered into an “Exit and Demobilization Agreement,” “in lieu of any final termination or statement of default under the Contract.” The District sent a letter requesting withdrawal of $3.5 million from the escrow account, attaching its attorney’s memorandum as to why withdrawal was permissible. Amoroso unsuccessfully sought an injunction. The court of appeal affirmed, rejecting Amoroso’s claim that a public project owner must await judicial resolution of the underlying contract dispute before it can withdraw retention funds. View "Pittsburg Unified Sch. Dist. v. S.J. Amoroso Constr. Co., Inc." on Justia Law