Government’s motions for judgment on the pleadings and for summary judgment on the contractor’s claims are, for the most part, granted. The contractor asserted that the government breached by failing to pay several invoices. The court, however, found that the invoices sought compensation for items that fell outside the contract’s fixed price term or that they sought recover for unauthorized changes. The contractor alleged it had been induced by a misrepresentation to enter the contract. But the court reasoned that the contractor could not simultaneously sue to enforce a contract while alleging that it was void due to fraud. The contractor further asserted that a termination for default should be converted to a termination for conveniences due to the occurrence of events beyond the contractor’s control. But the court determined that the contractor’s performance issues were caused by the contractor’s own decisions, not by matters outside of its control.
The Department of Energy’s Western Area Power Association (WAPA) had a contract with Isolux Corsan, LLC for the construction of power substation in South Dakota. WAPA terminated the contract with Isolux for default.
Following the termination, Isolux’s sureties entered a completion agreement with E&I Energy Services under which E&I would step in and complete the project for a fixed price of $5.4 million. The completion agreement provided that fixed price included, among other things, the cost of correcting any defects in Isolux’s work. Indeed, as part of the completion agreement, E&I warranted that it had inspected the status of the project and disclaimed any reliance or representations made by the sureties or WAPA.
The sureties tendered E&I to WAPA as the new prime contractor. E&I signed a follow-on contract with WAPA. The follow-on contract incorporated the tender agreement between the sureties and WAPA as well as the completion agreement between the sureties and E&I.
E&I, however, did not finish the project on time. WAPA terminated the contract for default. E&I submitted a claim to WAPA seeking $3.3 million. WAPA denied the claim. E&I filed suit with the Court of Federal Claims seeking to recover unpaid invoices, unpaid change orders, damages for assuming obligations based on misrepresentations, and damages resulting from other breaches of contract.
The court dismissed some of E&I’s theories for failure to state a claim. The only remaining issues were (1) a claim for breach on unpaid invoices, and (2) a claim alleging that the failure to pay the invoices rendered the default termination improper and converted it to a default for convenience. The government moved for summary judgment on the breach claim and for judgment on the pleadings for the termination claim. E&I cross-moved for summary judgment.
The government argued that E&I’s unpaid invoices claim failed for a variety of reasons. First, the government contended that that many of the invoices sought costs that fell outside of the contract’s fixed-price terms.
The court agreed with the government. The fixed price term stated that the price included all subcontractor claims, defects in Isolux’s work, and any other costs associated with performance, like bond premiums. The court found that many of E&I’s invoices sought compensation for payment of subcontractors, compensation for labor, and bond premiums. E&I had agreed that those prices were part of the fixed price. It could not seek to recover anything beyond that fixed price.
E&I alleged that it had been fraudulently induced to enter the contract by WAPA and the contracting officer, so the clause was null and void. The court found that this argument was at odds with E&I’s breach claim. A breach claim depends on the existence of a valid contract. If E&I was alleging breach, it could not simultaneously allege that the contract was void due to fraud.
For several other disputed invoices, the government argued that E&I was seeking compensation for work that had been solicited through amendments and addenda to the original contract with Isolux and thus were already included in the fixed price terms. Again, the court agreed with the government. E&I had warranted that it had examined all the amendments and addenda and informed itself with respect to those items. Thus, E&I had a contractually responsibility to make itself award of these amendments when it took over the contract. The company could not maintain a breach claim based on work that had been previously incorporated into the amendments.
With regards to a third group of invoices, the government noted that these invoices sought compensation for contract changes, but that E&I had not followed the procedure set forth in the contract’s changes clause. Once again, the court sided with the government. The contract stated that the contracting officer had sole authority to issue changes. Moreover, the contract required E&I to give written notice of any change to the contracting officer. Here, the record did not show that E&I had provided written notice of the changes to the contracting or received direct authorization of the change from the contracting officer.
The government argued that a fourth group of invoices were either unsupported by evidence or repudiated by E&I’s internal records. The court agreed. Many of the alleged unpaid invoices were annotated with notes that said “NO GO” or “DO NOT BILL,” which indicated the government was no obliged to pay those bills. Aside from the self-defeating annotations, the court found that that invoices lacked support and did not even show that work had actually been performed.
As to the termination issue, E&I contended that delays impacting its performance were unforeseeable and out of the company’s control. Thus, E&I argued, the termination for cause should be converted into a termination for convenience.
But the court noted that E&I also admitted that its delay on the projects was caused by payments it voluntarily made to Isolux’s contractors, which placed E&I in financial jeopardy. The court reasoned that admission was fatal to E&I’s claim. A termination for default may be converted to a termination for convenience when the delay is from causes beyond the contractor’s control. But by admitting that the it paid Isolux’s subcontractors, E&I had admitted that the delay was outside of its control. E&I was not obligated to pay Isolux’s subcontractors. Indeed, E&I was contractually prohibited from paying those subcontractors. E&I’s remedy for these payments lay with the sureties, not the government.
The court did find that there was an issue of fact concerning a claim for over $200,000 in supplies and services provided by E&I. Thus, the court denied summary judgment with respect to those supplies and services.
E&I represented by Joseph Whitcomb of Whitcomb Selinsky, P.C. The government is represented by Christopher L. Harlow and Patricia M. McCarthy of the Department of Justice as well as Thomas Cardova and Trever Upderaff of the Western Area Power Association.
