The government terminated a contract for default. The contractor argued its default was excusable because—through an alchemy of OSHA regulations and verbal discussions—some of the contractor’s duties under the contract had been transferred to the government. The COFC did not find this argument persuasive.
Sergent’s Mechanical Systems, Inc. v. United States, COFC NO. 21-1685C
- Termination for Default – The contract was for the repair of HVAC issues at a VA hospital. The contractor fell behind schedule. It had not installed cooling coils or abated asbestos as required by the contract. The government terminated the contract for cause. The contractor filed suit with the COFC challenging the termination and seeking payment for unpaid invoices.
- Asbestos Abatement – The contractor argued the termination was improper because its delay was excusable. First, the contractor argued that while it initially had contractual responsibility for asbestos abatement, that duty—through a combination of OSHA regulations and verbal discussions with the agency—had transferred back to the agency. The court rejected this argument. The contractor claimed an OSHA regulation made building owners responsible for asbestos abatement. The court, however, found the regulation only required owners to ensure remediation but not to perform it. There was also no evidence of a contract modification transferring responsibility for asbestos abatement to the government. The only evidence of this was the contractor’s notes documenting a verbal conversation with the agency. The court found this was not enough to transfer the contractor’s duties.
- Cooling Coils – The contractor also argued that its failure to install cooling coils was excused by an inconsistency in the contract regarding coil size. But the court found the contract was consistent. The plain language of the contract required 5/8-inch diameter coils. The court reasoned that to the extent the contractor was confused about the coils, it amounted to a negligible hassle that could have been resolved, not an excusable delay.
- Air Conditioning Outages – To perform some of the work, the contractor had to turn off the air conditioning in the hosptial. The contractor argued some of its delays had been caused by the government limiting the amount of time the contractor could shut down the air conditioning. But the court did not find this excuse compelling. The contract had specifically provided the government could limit air conditioning outages. The contractor should have accounted for the limitations on outages in its pricing and schedule.
- Unpaid Invoices – The contractor claimed the government had not paid over $500,000 for work it performed on the contract. But the court reasoned that having been terminated, the contractor now owed its surety for the costs of completing the work. The government had given $500,000 as a credit to the surety to offset the costs of completing the contractor’s performance. Because the credit would reduce the amount the contractor owed to the surety, it had effectively been paid to the contractor.
The contractor is represented by Joshua Sather of Whitcomb Selinsky, P.C. The government is represented by Matthew J. Carhart, Brian M. Boynton, Patricia M. McCarthy, and Deborah A. Bynum of the Department of Justice as well as Kathleen Ramos of the Department of Veterans Affairs.
–Case summary by Craig LaChance, Editor in Chief
