M.E.S., Inc. v. United States

104 Fed. Cl. 620, 2012 U.S. Claims LEXIS 551, 2012 WL 1862359
CourtUnited States Court of Federal Claims
DecidedMay 23, 2012
DocketNo. 10-92
StatusPublished
Cited by4 cases

This text of 104 Fed. Cl. 620 (M.E.S., Inc. 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
M.E.S., Inc. v. United States, 104 Fed. Cl. 620, 2012 U.S. Claims LEXIS 551, 2012 WL 1862359 (uscfc 2012).

Opinion

MEMORANDUM OPINION AND ORDER

BRADEN, Judge.

I. RELEVANT FACTS.2

On July 20, 1998, the United States Postal Service (“USPS”) issued Solicitation Number 332495-98-A-0136 for proposals to construct a new postal facility in Riverhead, New York (the “Riverhead Project”). PX 1. On August II, 1998, M.E.S., Inc. (“MES” or “Plaintiff’), acquired Performance Bond No. 73 SB 103097863 BCM (the “Performance Bond”) from Travelers Casualty & Surety Company of America (“Travelers”). Pl. PFUF ¶ 4; PX 3. The Performance Bond “firmly bound” Travelers to the USPS in the sum of up to $3,954,000.00, to be paid to the USPS unless all of MES’ obligations under the contract were met. PX 3.

On September 10, 1998, the USPS awarded Contract No. 332495-98-B-0307 to MES for the Riverhead Project in the amount of $3,954,000 (“the September 10, 1998 Contract”). PX 2. On October 6, 1998, Plaintiff received a Notice to Proceed issued by the USPS, that fixed the completion date of the Riverhead Project as August 2, 1999. PI. PFUF ¶ 5; PX 4.

On June 2, 1999, the USPS terminated the September 10, 1998 Contract for default because MES allegedly failed to adhere to scheduling duties and requirements, causing a four and one-half month delay in project completion. PX 5. On June 10, 1999, the USPS forwarded a copy of the June 2, 1999 Termination Notice to Travelers and requested that it complete the Riverhead Project, as required by the Performance Bond. IX F. On or around October 1, 1999, Travelers declined to take over the project on the expedited basis requested by USPS. PX 30.

[623]*623At the time of termination, i.e., June 2, 1999, a report prepared by LiRo Engineer & Construction Management, P.C., the USPS’s engineering consultant, indicated that $2,891,086 of funds had not yet been paid to MES and were still available to complete the Riverhead Project on budget. Pl. PFUF ¶ 8; PX 7 at 5.

On August 5, 1999, the USPS met with MES to discuss rescinding the termination for default and/or settling USPS’s potential liability to MES. Pl. PFUF ¶¶ 21-26; PX 19-22. These negotiations failed. PX 25. An August 26, 1999 letter from the USPS Contracting Officer (the “CO”) reported that he expected that “$2,800,000.00 would be required to complete all work [on the Riverhead Project].” PX 26.

On October 12, 1999, the CO informed Travelers and MES that the USPS intended to reprocure the Riverhead Project to ensure timely completion. PX 30.

On October 19, 1999, Plaintiff appealed the USPS’s June 2, 1999 decision to terminate the September 10, 1998 Contract for default to the USPS Board of Contract Appeals (“PSBCA”). Pl. PFUF ¶ 30; PX 29. On November 10, 1999, Travelers informed the USPS that it would not take over the River-head Project while the PSBCA appeal was pending. PX42; IX G.

On November 6, 2001, Plaintiff submitted a certified claim to the CO “requesting compensation for change order work, differing site conditions, delay, additional office and site work, and payment of damages for defective specifications and actions by the USPS.” Compl. ¶ 10; CM/ECF Doc. No. 49 (the certified claim). On November 26, 2001, the CO deferred consideration of MES’ certified claim until the PSBCA ruled on MES’ pending appeal. Compl. ¶¶ 12-13.

On July 7, 2003, the USPS again notified Travelers that it intended to reproeure the Riverhead Project and would seek reimbursement from Travelers under the Performance Bond for any costs incurred that exceeded the September 10, 1998 Contract price. USPS Compl. ¶ 27.

On August 25, 2003, Travelers responded that it would not consider any claim under the Performance Bond unless the PSBCA determined that MES’ termination for default was lawful. USPS Compl. ¶ 28.

An August 1, 2003 USPS document entitled “Decision Analysis Report” explained:

The contractor appealed to convert the termination for default to convenience on October 10, 1999. The hearing was not held until February 2001. In the interim, the Bonding Company refused to continue work with another contractor, siding with the terminated contractor. Under advisement of counsel, the Postal Service Contracting Officer did not proceed to re-procure the construction during that time. A final decision by the [PSBCA] has been pending since September 2001, but all indications are that it will be resolved in the favor of the contractor. The Postal Service expects the award to be significantly less than the contractor’s claim for $3.9 million. Since re-procurement will no longer prejudice the case, the Postal Service wants to re-start construction.

PX 31 at 1.

Other than requesting that Travelers assume performance of the Riverhead Project, the USPS did not take any other action to reproeure between the June 2, 1999 termination for default and April 26, 2004. Pl. PFUF ¶ 10.

On April 26, 2004, the USPS issued Solicitation No. 332495-04-A-0069 to reproeure the remainder of the Riverhead Project. Pl. PFUF ¶ 33; PX 32. On July 16, 2004, the USPS awarded a contract to THC Realty Development (“THC”) for $4,914,000. Pl. PFUF ¶ 37; PX 36. As reprocured, the Riverhead Project was amended to account for “changes in codes and Postal standards,” as well as certain “betterments.” PX 42.

From the USPS’s June 2,1999 termination of the September 10, 1998 Contract for default to July 16, 2004, the USPS did not take any measures to protect the project site from deterioration. PX 33 at 24. Subsequently, the USPS determined that site deterioration costs were approximately $292,112. PX 42 (USPS estimate in the CO’s Feb. 19, 2009 Final Decision); PX 8 at 2 (Nov. 1, 2008 USPS consultant’s report reaching same fig[624]*624ure). Compare DX 1 at A19 (Government’s expert’s litigation report, estimating deterioration costs as $230,237).

In addition, the USPS estimated that the reproeured contract reflected $668,619 of “[c]ost escalation,” owing to increased wages and materials costs. PX 42 (USPS estimate in the CO’s Feb. 19, 2009 Final Decision); PX 8 at 2 (Nov. 1, 2008 USPS consultant’s report reaching same figure). Compare DX 1 at A19 (Government’s expert’s litigation report, estimating cost escalation at $618,669). Finally, the reproeured contract included an estimated $327,827 for “changed work” and $77,737 for “betterments” ordered by the USPS. PX 42 (USPS estimate in the CO’s Feb. 19, 2009 Final Decision); PX 8 at 2 (Nov. 1, 2008 USPS consultant’s report reaching same figure). Compare DX 1 at A 19 (Government’s expert’s litigation report, estimating $355,067 for change costs and $23,014 for betterments).

On June 4, 2005, THC completed the Riv-erhead Project. PI. PFUF ¶ 40; PX 38.3 On September 27, 2006, the USPS made a final payment to THC. PX 42.

On January 31, 2006, the PSBCA denied MES’ August 16, 1999 appeal of the USPS’s decision to terminate for default. See In re M.E.S., Inc., PSBCA No. 4462, 06-1 BCA ¶ 33,184, 2006 WL 1064175 (Jan. 31, 2006) (reproduced at PX 39). The PSBCA determined that the CO should have granted Plaintiff additional time to complete the Riv-erhead Project because of delays attributable to USPS, but the maximum permissible extension was 78 days. Id. at 32-33.

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104 Fed. Cl. 620, 2012 U.S. Claims LEXIS 551, 2012 WL 1862359, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mes-inc-v-united-states-uscfc-2012.