Prime Interfered with and Hindered Subcontractor’s Performance

A prime contractor was liable to a subcontractor for breach of contract, according to the District Court for the Eastern District of Pennsylvania, because the prime caused delays, increased the subcontractor’s costs, constructively modified the subcontract, and breached the duty of good faith and fair dealing. The dispute arose from a $29.8 million cost-reimbursable task order to replace a runway at an air base in Guam. The prime completed the project within the government’s $30 million budget of by granting few price modifications or schedule extensions to the subcontractor that performed the work. The subcontractor, on the other hand, incurred a substantial cost overrun and alleged a total job cost of $47.7 million. In total, the subcontractor attributed 251 days of delay and $16.2 million of the costs to the prime.

Specifications Issue

The court found the project experienced substantial early delays and unexpected costs that were indisputably caused by the subcontractor. However, the trial evidence and testimony showed the prime was either primarily responsible for some delays or additional costs, or was unreasonable in its direction or evaluation of the subcontractor’s performance. For example, the subcontractor prevailed on its claim that the prime’s hot mixed asphalt specifications could not be met using only locally available aggregate and were unnecessary in Guam’s tropical environment, and that the prime’s initial insistence on compliance with the specifications delayed the HMA paving process and required the subcontractor to remove and replace 25 lots of pavement. Although the parties entered into the subcontract with the assumption that locally available aggregate would meet the specifications, or that the specifications would be waived to accommodate local materials, nothing in the subcontract provided for a waiver or an adjustment for the importation of other materials. Thus, the subcontractor bore the “risk” of that occurrence.

Initial Good Intentions

Nevertheless, the prime’s post-award attempts to create an HMA mix with local materials that met specifications—which ultimately resulted in government approval and variances for a mix design that was substantially similar to the one submitted by the subcontractor over two months earlier—violated the duty of good faith and fair dealing. Regardless of the prime’s initial good intentions, it interfered with and hindered the subcontractor’s performance by taking the HMA mix design process out of the subcontractor’s hands. Thus, it was unjust to hold the subcontractor responsible for the delay associated with the prime’s own unsuccessful attempts to improve the mix design. The subcontractor obtained partial relief on its remaining claims. ( Nippo Corp./Int’l Bridge Corp., JV v. AMEC Earth & Environmental, Inc., DC ED Pa, 57 CCF ¶80,049)