National Wrecking Company v. Sarang Corporation

851 N.E.2d 787, 366 Ill. App. 3d 610, 303 Ill. Dec. 600, 2006 Ill. App. LEXIS 490
CourtAppellate Court of Illinois
DecidedJune 6, 2006
Docket1-05-0637 Rel
StatusPublished

This text of 851 N.E.2d 787 (National Wrecking Company v. Sarang Corporation) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
National Wrecking Company v. Sarang Corporation, 851 N.E.2d 787, 366 Ill. App. 3d 610, 303 Ill. Dec. 600, 2006 Ill. App. LEXIS 490 (Ill. Ct. App. 2006).

Opinion

JUSTICE SOUTH

delivered the opinion of the court:

This appeal arises from the circuit court’s order confirming an arbitration award in favor of National Wrecking Company (National) and against Sarang Corporation (Sarang) as the result of a demand for arbitration filed by Sarang against National to determine issues relating to a joint venture formed by the parties.

The case commenced with a demand for arbitration with the American Arbitration Association filed by Sarang against National on December 1, 2003, in which Sarang stated that the nature of the dispute was “what work will be performed by the Joint Venture to comply with FAR 52.219 — 4 [sic]. What entity will perform soil remediation work.” The arbitrator held hearings and heard testimony on five occasions between June 29, 2004, and July 20, 2004, and reviewed the briefs and documents filed by counsel for the parties and heard oral arguments on September 10 and 13, 2004.

The arbitrator made the following findings of fact: Sarang is an Illinois corporation certified as a section 8(a) (13 C.F.R. § 124.1 et seq. (2006)) contractor by the United States Small Business Administration (SBA). Bineet Sarang is the president of Sarang, Sarv Singh is an estimator employed by Sarang, and Mallik is the quality control manager employed by Sarang. National is also an Illinois corporation. Allen Mandell is the president of National, Sheldon Mandell is the chairman of the board of National, and Joe Naumes is the vice-president of National. The arbitration proceedings stemmed from the formation of a joint venture between National and Sarang to bid on a Navy demolition project at the Great Lakes Navy Training Center (Navy Project).

The Navy Project was administered through the SBA as a section 8(a) small business set-aside contract, for which Sarang was eligible to bid. The Navy Project included a base project of demolition of five buildings and an option project for the demolition of five additional buildings. The SBA has a section 8(a) program entitled the “Mentor-Protege Program,” whereby larger businesses that are not considered disadvantaged can perform portions of a section 8(a) small business set-aside contract if the larger business qualifies as a mentor under the program and enters into a joint venture agreement with the small business contractor.

In late December 2002 at a meeting at National’s offices, Bineet requested that a joint venture be formed to bid on the Navy Project. Mandell indicated that National would not be interested unless it could perform all of the demolition work, to which Sarang agreed. Sarang then presented National with a proposed joint venture agreement which provided for at least 15% self-performance of the cost of the contract pursuant to the requirements of the Federal Acquisition Regulation (FAR) 52.219 — 14 (48 C.F.R. § 52.219 — 14 (2005)), which governs the minimum percentage of work which the small disadvantaged business contractor must “self-perform.”

The parties met again on January 3, 2003, at which time the details of the work to be performed on the Navy Project were discussed. Mandell described the work that National would perform on the job as part of its demolition subcontract based on the bid documents at that time, which included the demolition of buildings above and below grade; the removal of and disposal of medical waste from Building 1400; the backfilling of areas where the foundations were removed; and rough grading of the site. Sarang was to obtain bids for all work other than that to be performed by National.

On January 16, 2003, Sarang and National entered into a joint venture agreement (Agreement) effective January 1, 2003. The Agreement provided that the joint venture will perform at least 15% of the cost of the contract per the requirements of FAR 52.219 — 14 (48 C.F.R. § 52.219 — 14 (2005)) and that any disputes would be settled by arbitration. Also on that date, the Navy issued a modification to the Navy contract which required the contractor to include in its lump-sum bid the cost of removal of all contaminated soils disturbed during the removal of the underground structures and utilities along with a unit price for the removal of the contaminated soils.

Approximately a week before the joint venture was to submit its first bid, National informed Sarang that it was only going to bid a unit price per ton for the removal of the contaminated soils disturbed during demolition because it was too risky for it to include the removal of contaminated soils in the lump-sum bid since the quantity of those soils was unknown. On January 31, 2003, National and Sarang entered into an agreement in which they confirmed that if the joint venture was awarded the Navy Project, the joint venture agreed to award the demolition portion of the project to National and the asbestos abatement portion to Colfax Corporation, which was owned by some of the owners of National. Also on January 31, 2003, the joint venture submitted its first bid in the amount of $2,208,000, which included $5,000 for the removal of medical waste under Building 1400. The contaminated-soils remediation was bid at a unit price of from $75 to $80 per ton, depending upon the building being demolished. Naumes prepared National’s price for the removal of contaminated soils without any assistance from Singh, Bineet or anyone else associated with Sarang. The Navy informed Sarang and National that the joint venture must submit a revised bid with, among other things, a lump-sum price that includes all costs for the removal and remediation of contaminated soils and other hazardous materials disturbed during the demolition project by March 7, 2003 (the Alternate A bid). The Navy explained what soils it considered to be covered by the term “disturbed” in a conference call with Mandell, Naumes, Singh and Bineet on February 27, 2003. After this call, Mandell informed Bineet that he had not decided whether National would provide a lump-sum price for the contaminated-soils remediation because of the financial risk because it was unable to estimate the quantity or type of contaminated soil.

Based on the Navy’s Alternate A bid request, National calculated the number of tons of soil that could be disturbed during the demolition process and estimated the percentage that might be potentially contaminated soil at one-third. Sarang did not take any steps to obtain any other contractor’s bid or seek a price from another contractor for this work, and the joint venture never interviewed any other party to subcontract any portion of the contaminated soil work. Singh’s notes from February 27, 2003, showed that National was responsible for this part of the Alternate A bid.

Prior to the March 7, 2003, deadline for the Alternate A bid, National informed Sarang that its price for the contaminated soil remediation on the base bid would be $511,180 and $518,000 on the option bid. National told Sarang that it was prepared to perform that work and would take the risk that its calculations were wrong in order to win the contract.

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Bluebook (online)
851 N.E.2d 787, 366 Ill. App. 3d 610, 303 Ill. Dec. 600, 2006 Ill. App. LEXIS 490, Counsel Stack Legal Research, https://law.counselstack.com/opinion/national-wrecking-company-v-sarang-corporation-illappct-2006.