Govt.'s Letter Deleting Work Was Not A Contract Termination Notice

Tuesday, April 03, 2018 9:04 am
April 2018 - Volume 40 Number 4

A project owner notified its contractor that it was deleting work from the original contract. Was that letter a notice of contract delay? project suspension? or contract termination? The contractor in Am. Civil Constr., LLC v. Fort Myer Const. Corp., 2018 U.S. Dist. Lexis 26255 (D.C. Feb. 20, 2018) was not sure.

In 2008, the District of Columbia Department of Transportation (DDOT) contracted with Fort Myer Construction Corporation (Fort Myer) to build a new streetcar line in Anacostia. In turn, Fort Myer subcontracted with American Civil Construction, LLC (ACC) to perform a portion of the work. Fort Myer and ACC began work on the project in 2009 and, by October 2010, had received payments for completing some of the work. Then, DDOT notified Fort Myer that it was changing the original contract scope and deleting some work.

Fort Myer sent a letter to ACC confirming their "verbal notification to [ACC] of DDOT’s desire to ‘shut-down’ the project." That "shut-down" interpretation of DDOT’s action was significant.

The Fort Myer-ACC subcontract provided that the contractor could terminate the subcontract for convenience only if DDOT first terminated the prime contract for convenience. After the "shut-down" notice, Fort Myer decided not to use ACC for the portion of the project that DDOT didn’t delete. It believed it was abiding by the subcontract---i.e., that DDOT had terminated for convenience the subcontract work that ACC hadn’t yet completed and thus Fort Myer could terminate for convenience its agreement to use ACC for that work.

The subcontractor disagreed, contending that DDOT had not terminated Fort Myer’s contract.

Project owner’s letter deleted work for no stated reason

The "Article 3 Letter" DDOT sent Fort Myer in October 2010 outlined the work that remained to be "performed under a new scope of work": (1) remaining work that was part of the original contract and (2) remaining work that had been added to the contract by change orders after the work had begun. The letter did not explain why certain items were deleted from the contract. (The parties learned later that DDOT had experienced a hold-up procuring a needed permit for the project.)

At the end of October 2010, DDOT directed Fort Myer to resume work on t[..]