Florida, Department of Insurance v. United States

40 Cont. Cas. Fed. 76,775, 33 Fed. Cl. 188, 1995 U.S. Claims LEXIS 81, 1995 WL 251940
CourtUnited States Court of Federal Claims
DecidedMarch 9, 1995
DocketNo. 93-29 C
StatusPublished
Cited by9 cases

This text of 40 Cont. Cas. Fed. 76,775 (Florida, Department of Insurance v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Florida, Department of Insurance v. United States, 40 Cont. Cas. Fed. 76,775, 33 Fed. Cl. 188, 1995 U.S. Claims LEXIS 81, 1995 WL 251940 (uscfc 1995).

Opinion

OPINION

HODGES, Judge.

This case is an action to set aside a default termination as improper and to convert the termination to one for the convenience of the government. For the reasons set forth below, we affirm the termination for default.

I. Background

Defendant awarded Padula Construction Company a $2 million fixed-price construction contract to build a new main Post Office in Jupiter, Florida in September 1987. Padula received a notice to proceed in October. The contract completion date was October 1988. In accordance with the requirements of both the contract and the Miller Act, Padula agreed to furnish performance and payment bonds. The bonds were issued through Southeastern Casualty & Indemnity Insurance Company.

During the first year of Padula’s performance, the Postal Service voiced concerns regarding Padula’s progress and its ability to complete the contract. In early October 1988, Padula’s performance deteriorated to the point that it had effectively ceased work on the project. The Postal Service issued a show cause letter on October 4 notifying Padula that it was considering terminating the company’s right to proceed. Padula did not respond and took no action to address the concerns of the Postal Service. Accordingly, the Postal Service terminated Padula’s right to proceed on October 18,1988. Defendant sent a copy of the termination letter to Southeastern on the same day.

Southeastern provided the Postal Service with a surety takeover notification on October 26. The takeover agreement provided that Southeastern would use its best efforts to complete all of the work on the contract according to the original contract plans and specifications. It agreed to deliver a written strategy for completing the project within two weeks. The plan insured that the existing contract would remain in full force and effect, monthly progress payments would include the same schedule of values as the original contract, and that Southeastern would submit a revised project schedule to the Postal Service within ten days. The Postal Service did not establish a new completion date at this meeting or at any time thereafter.

In November, representatives from Southeastern and Gee & Jenson, the Postal Service’s architect, visited the construction site to determine the status of the project. Gee & Jenson identified twenty-one areas and items requiring corrective work.

Shortly thereafter, the Postal Service expressed concern about Southeastern’s lack of progress and requested a strategy for completion of the project. It also requested the schedule that Southeastern had agreed to deliver at the October 26 meeting. In response, Southeastern promised to provide the formal contract schedule and completion procedure, as well as its contractor selection, by the end of December. Southeastern never submitted either an adequate project schedule or a plan for completion.1

Southeastern had not advanced the project’s completion by December 27. On that date, Gee & Jenson informed Southeastern that damage was being caused to parts of the structure due to exposure to the elements. In particular, the architect was concerned about water infiltration because the roof was not complete and because the structure had not been enclosed. Gee & Jenson also informed Southeastern of additional areas requiring corrective work. Southeastern took no action and did not cover the roof. As a result, the structure continued to deteriorate from its exposure to wind and rain.

Subsequently, the Postal Service told Southeastern that it was concerned about Plaintiffs lack of response and its failure to obtain a new general contractor. Again, the Postal Service requested the schedule for [192]*192completion that Southeastern had agreed to provide earlier.

The Postal Service was informed at a February 1989 meeting that Southeastern had chosen Frank Maio General Contractors to complete the contract. The Postal Service was not given an opportunity to review and approve Maio beforehand, as provided in the contract. The Postal Service reiterated its many concerns about the project and requested schedules for progress and completion — now almost three months overdue. None of the corrective work or deterioration previously identified had been corrected. The roof remained uncovered and the building continued to sustain damage. Only one contractor was on the job in February 1989 and that contractor was concerned mostly with security and sweeping floors.

Maio subcontracted the roofing work in March. Gee & Jenson visited the project site on March 23 and found that for all intents and purposes no work was in progress. The roof was still incomplete.

In early April, the Contracting Officer became aware that Southeastern had failed to meet the standards required of sureties on federal projects. As a result, it was likely that the Department of Treasury would revoke Southeastern’s certificate of authority to act as a federal bond surety. Accordingly, the Contracting Officer requested a meeting with Southeastern to discuss the company’s lack of progress and to discuss its danger of being terminated. At the April 18 meeting, Southeastern replied to the Postal Service’s concerns by stating that it had no obligation to keep the Postal Service informed of its progress.

The Contracting Officer sent Southeastern a letter on April 25 informing the surety of imminent termination. Southeastern responded again that the surety’s only responsibility was “to ensure the completion of the contract.” By May 12, Southeastern had increased the project’s percentage of completion by only ten percent from where it stood after Padula’s termination.

In May, the Contracting Officer consulted with a technical representative, attorneys, and other staff to determine whether Southeastern should be terminated. He examined all relevant documents concerning Southeastern’s role in the project, and also reviewed the United States Postal Service Procurement Manual.

The Postal Service terminated Southeastern for default on May 12. The same day, the Department of Treasury revoked Southeastern’s certificate of authority and removed it from the list of qualified federal sureties. Southeastern protested the default termination to the Contracting Officer, who ruled for the Postal Service. Plaintiff then filed suit in this court seeking to invalidate the default termination and convert it to a termination for convenience. We find that the termination for default was proper.

II. Discussion

Southeastern was responsible for completion of the project after Padula’s default. Dependable Ins. Co. v. United States, 846 F.2d 65, 66 (Fed.Cir.1988). Shortly after the October 26, 1988 meeting, Southeastern submitted a surety takeover notification to the Postal Service, and agreed to use its best efforts to complete all the work on the contract according to the original contract plans and specifications. In exercising this option to complete the contract, Southeastern stepped into the shoes of Padula. In essence, it became the contractor. Travelers Indemnity Co. v. United States, 16 Cl.Ct. 142, 153 (1988); Aetna Casualty & Surety Co. v. United States, 845 F.2d 971, 974 (Fed.Cir.1988).

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Bluebook (online)
40 Cont. Cas. Fed. 76,775, 33 Fed. Cl. 188, 1995 U.S. Claims LEXIS 81, 1995 WL 251940, Counsel Stack Legal Research, https://law.counselstack.com/opinion/florida-department-of-insurance-v-united-states-uscfc-1995.