H. B. Zachry Co. v. Ceco Steel Products Corp.

404 S.W.2d 113, 1966 Tex. App. LEXIS 2476
CourtCourt of Appeals of Texas
DecidedMay 6, 1966
Docket4002
StatusPublished
Cited by30 cases

This text of 404 S.W.2d 113 (H. B. Zachry Co. v. Ceco Steel Products Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
H. B. Zachry Co. v. Ceco Steel Products Corp., 404 S.W.2d 113, 1966 Tex. App. LEXIS 2476 (Tex. Ct. App. 1966).

Opinion

GRISSOM, Chief Justice.

This suit arose out of the construction in 1960 and 1961 of twelve Atlas missile launching sites for the United States in a six county area surrounding Abilene. H. B. Zachry Company and Brown & Root, Inc., as joint venturers, hereinafter called Zachry-Brown, were the prime contractors under a written contract with the United States acting through its Corps of Engineers. Ceco Steel Products Corporation and G & N Corporation were subcontractors with agreements to furnish and place reinforcing steel under written contracts with Zachry-Brown, approved by the *115 government. Erection of these sites was a governmental crash program for launching international ballistic missiles, intended to speedily narrow the missile gap between the United States and Russia. Said prime and subcontractors initially suffered losses on the project. However, Zachry-Brown eventually collected from the United States more than $31,000,000.00 on its $20,000,-000.00 contract. The difference in the amount agreed to he paid and the amount collected by Zachry-Brown is accounted for by the fact that the first interest of our government was to get the missile sites in operation as fast as possible. No pilot plants were built. The missiles were still being developed and improved while the missile launching sites were being constructed. All contractors were required to perform their work faster than was contemplated when their contracts were signed. Many changes in plans, schedules and work were required by the government while said contracts were being executed.

Stated tersely, this suit is mainly based upon the contention of subcontractors Ceco and G & N that when Zachry-Brown collected $2,463,312.49 from the United States upon completion of the contracts they collected for some losses by Ceco and G & N which they have not paid over to Ceco and G & N. Plaintiffs also sought to recover from Zachry-Brown damages for breach of their contract to furnish and maintain for appellees certain access roads and storage facilities, also, “retainage”, money due plaintiffs under their subcontracts for labor and material furnished; plus interest and attorneys’ fees.

No such missile launching sites had been built when contracts for construction of these twelve sites were made. In its contract with Zachry-Brown the government reserved the right to make changes in plans and specifications and to require other work. The government emphasized that time extensions would not be granted. The government attempted the simultaneous development of missiles, design and construction of said bases and the training of crews. The stream of changes ordered by the government compelled said contractors to do their work differently, faster than planned and out of scheduled, orderly sequence. During construction, while all contractors here ir^olved were losing money because of such changes, there was a Congressional investigation. It was recognized by an appropriate Congressional committee and the Corps of Engineers that such change orders, lack of completion of plans and designs, unusually adverse weather conditions and the like, were causing labor and material to cost said contractors much more than was contemplated when their contracts were signed.

During construction there were 117 changes ordered by the Corps of Engineers. They disrupted orderly execution of all contracts. Some of the changes could not have been anticipated by the contractors when they were estimating and bidding on their contracts. Some of the work was done under the most adverse weather conditions in the history of the area. The contractors were forced to assemble approximately twice as much equipment and to recruit about two and one-half times the number of employees reasonably estimated when their contracts were made. Ceco and G & N had reasonably planned to perform their subcontracts with experienced crews, to use the knowledge gained while working on the first group of three sites on later sites and to pay little overtime. These things increased the contractors’ requirements for the number of employees far above the number of skilled workmen available and compelled them to use inexperienced men and to work as long as seventy hours per week. All contractors planned to work on three sites at a time. Because of the government’s change orders they were required to furnish equipment and manpower sufficient to do the work on as many as nine sites at one time. Said subcontractors contemplated completion of their contracts in December, 1960. They were still working thereon in August, *116 1961. The contracts provided that the United States would pay the cost of acceleration and extra effort so required; that time extensions would not he granted, but the government would pay the contractors the losses they sustained which were not caused by their own fault.

At the Congressional hearing, the Chairman of the Appropriations Sub-Committee called for answers to certain questions. He said such contracts provided for allowing contractors extensions of time for excusable delays caused by matters beyond their control, such as unusual weather, acts of the government, and the like, but that the Corps of Engineers could not grant time extensions without approval of the Air Force. He asked, if time extensions were not granted, what should the government do about the contractors’ increased costs. General Itschner, head of the Corps of Engineers, recognized such claims as proper and inquired how such claims could best be handled and the contractors paid therefor. How could the contractors substantiate their claims ? The committee was informed that such contracts provided that if changes made by the government increased the expenses of contractors, or if conditions not chargeable to them caused losses by contractors, an equitable adjustment would be made with them by the government. It was stated that such losses were being caused by the increased expense of contractors resulting from government change orders, which required payment of an unexpected amount of overtime for labor, inefficiency of men working longer hours than expected and that the project would require contractors to furnish more equipment, more workmen and more pay more overtime and produce greater inefficiency than could have been anticipated when the contracts were signed. There was evidence that labor became more inefficient with every hour worked over 48 hours per week and by being required by the government rush orders to work in small areas where different groups interfered with each other; that when such required acceleration destroyed ability to benefit from experience, as, for example, the subcontractors proper plan to work on not more than three sites at a time was changed by the government requiring them to work on nine sites at one time; plans and schedules were interrupted and cost of performance of their contracts increased, having a devastating effect on the cost to contractors of equipment, material, labor and transportation. It was concluded that the interest of contractors and the government alike would be protected by negotiation of all equitable claims. The details of what must be furnished to substantiate a claim was to be decided on each claim by the contracting officer for the Corps of Engineers.

Ceco and G & N, being subcontractors under Zachry-Brown, had no contractual relationship with the United States. Neither could present directly to the government a claim for such losses. Zachry-Brown did have the right and the duty to assert any power claim for them.

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Bluebook (online)
404 S.W.2d 113, 1966 Tex. App. LEXIS 2476, Counsel Stack Legal Research, https://law.counselstack.com/opinion/h-b-zachry-co-v-ceco-steel-products-corp-texapp-1966.