Nebraska Public Power District v. Austin Power, Inc.

773 F.2d 960, 3 Fed. R. Serv. 3d 958
CourtCourt of Appeals for the Eighth Circuit
DecidedSeptember 16, 1985
DocketNos. 84-2420, 84-2473 and 85-1065
StatusPublished
Cited by7 cases

This text of 773 F.2d 960 (Nebraska Public Power District v. Austin Power, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nebraska Public Power District v. Austin Power, Inc., 773 F.2d 960, 3 Fed. R. Serv. 3d 958 (8th Cir. 1985).

Opinion

HEANEY, Circuit Judge.

I. BACKGROUND.

Nebraska Public Power District (Nebraska Power), a public corporation and political subdivision of the State of Nebraska, operates' an electrical utility system with facilities to generate and transmit electricity. In 1972, Nebraska Power decided to build the Gerald Gentlemen Station (Station), a 650-megawatt coal-fired electric generating plant, near Sutherland, Nebraska. Nebraska Power decided to purchase directly from suppliers all the permanent equipment and materials necessary to construct the Station, and to contract only for the labor and construction’equipment to erect the facility. Five companies submitted bids, including Austin Power, Inc. (Austin).1

Austin was awarded the contract, bidding a total contract target price of approximately $67.8 million, based on an estimated 4.5 million man-hours. The major components of Austin’s bid were divided as follows:

1. Total Recoverable Costs $47.8 million
2. Fixed Costs $13.2 million
3. Fixed Fee $ 6.8 million
$67.8 million

Austin Industries, Inc. (Austin Industries), Austin’s parent company, furnished Nebraska Power with a guarantee agreement to assure Austin’s performance. Federal Insurance Company (FIC) issued a performance bond to Nebraska Power to secure Austin’s performance.

The contract contained an incentive provision which provided that if Austin completed the project for less than ninety-six percent of its target price, it would receive a bonus of fifty percent of the increment below this ninety-six percent figure. The contract also provided that if Austin completed the project for more than 104 percent of its target price, it would be responsible for fifty percent of the overrun above this 104 percent figure.

The construction of the Station (projected to take thirty-seven months and 4.5 million man-hours) eventually required forty-eight months and nearly nine million man-hours [963]*963to complete, resulting in substantial cost overruns. During the course of the project, Nebraska Power paid Austin approximately $17.4 million as its share of the cost overruns pursuant to the overrun sharing provision of the contract. Nebraska Power then filed an action against Austin and Austin Industries sounding in breach of contract, negligence, and misrepresentation. Nebraska Power initially sought in excess of $50 million in damages from Austin, including a refund of the money paid to Austin pursuant to the overrun sharing provision, contending that Austin was primarily responsible for the cost overruns and thus it had been improperly forced to bear fifty percent of the overrun costs. It further contended that it had incurred other substantial consequential costs and damages, including the additional cost of purchasing electricity to meet customer demands during the delay period.

Before the case was submitted to the jury, Nebraska Power reduced its claim to $35.6 million. Specifically, it claimed that Austin failed to (1) provide sufficient organization, planning, management and direction of its work force on the project; (2) properly receive and unload materials and equipment furnished by Nebraska Power; (3) store, protect and maintain an accurate inventory of these materials; and (4) establish and maintain a quality control program.2 Nebraska Power asserted that it was damaged in the following particulars:3

SUMMARY OF NEBRASKA POWER’S DAMAGES (Exhibit No. 2472)
Item # Description Delay Total Overrun
1 Increased Labor Escalation paid by NPPD to NIC $1,949,675 $ 4,981,224 $ 3,031,549
2 Premium time paid by NPPD to NIC 0 0
3 Overrun costs paid by NPPD to NIC $13,244,594 $13,244,594
4 Costs incurred by NPPD as a result of poor NIC workmanship $ 630,896 $ 630,896
5 Increased material costs paid by NPPD as a result of NIC’s loss, waste, or misuse of NPPD-supplied materials $ 1,155,489 $ 1,155,489
6 Costs incurred by NPPD to perform NIC’s contractual obligations $ 444,921 $ 444,921
7 Escalation costs of fuel, materials and labor incurred by NPPD as a result of NIC’s delay to project completion $ 248,205 $ 248,205
8 Increased engineering, construction management and construction power costs as a result of NIC’s delay to project completion $ 513,619 $ 513,619
[964]*964Item # Description Overrun Delay Total
9 Increased vendor costs paid by NPPD as a result of NIC’s inexperience and delay to project completion $1,316,084 $ 1,316,084
10 Increased insurance costs paid by NPPD as a result of NIC’s manhour overrun and delay to project completion $ 251,452 $ 243,853 $ 495,305
11 Impact aid to schools $ 899,706 $ 899,706
$19,658,607 $4,271,436 $23,930,043
12 Increased interest on bonds paid by NPPD to finance the construction cost overrun caused by NIC $11,692,479_$11,692,479
$31,351,086 $4,271,436 $35,622,522

Austin filed a counterclaim against Nebraska Power, alleging breach of contract and quantum meruit. It sought $55 million in damages,4 contending that its total cost for performing the contract had increased from $67.8 million to $132.8 million, and that Nebraska Power was responsible for all of the cost overruns. Before the case was submitted to the jury, Austin reduced its damage claim to $31 million. Specifically, Austin claimed that it had incurred the additional costs in erecting the Station due to the following Nebraska Power contract breaches: (1) late and inaccurate construction and installation drawings; (2) lack of construction management services; (3) untimely delivery of material and equipment furnished by Nebraska Power; (4) mis-fabrication of material and equipment furnished by Nebraska Power; (5) failure to administer the change work provisions of the contract properly; (6) requiring Austin to provide labor not required in the contract without issuing change work orders; (7) failure to coordinate the furnishing of grout for the pulverizers; (8) requiring Austin to erect the steam generator building to conform to a stricter tolerance than required in the contract; (9) failure to pay its share of Craft 68 labor; and (10) failure to unload and properly store materials and equipment delivered before Austin arrived at the construction site.5 Austin presented its damages for these claims in the following manner:6

SUMMARY OF AUSTIN’S DAMAGES (Exhibit No. 180 A 123)
Project Cost Incurred
1. Recoverable Labor $84,855,282
2. Subcontracts $13,494,688
3. Employee Move in Costs (Relocation) $ 207,975
[965]*965Project Cost Incurred
4.

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Bluebook (online)
773 F.2d 960, 3 Fed. R. Serv. 3d 958, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nebraska-public-power-district-v-austin-power-inc-ca8-1985.