Partial Release Limited Sub's Miller Act Recovery

Friday, November 02, 2018 6:28 am
October 2018 - Volume 40 Number 10

Miller Act

United States v. Cont’l Cas. Co., 2018 U.S. Dist. Lexis 144107 (Md. Aug. 23, 2018)

A subcontractor sought recovery for damages under the Miller Act but was able to recover only amounts for work performed after substantial completion.

Grunley Construction Company, Inc. (Grunley) entered into a prime contract with the General Services Administration (GSA) in October 2013 for a construction project at the Social Security Administration headquarters in Woodlawn, Maryland. Grunley subcontracted out the electrical work to Aarow Electrical Solutions, LLC (Aarow).

Because of the nature of Aarow’s project work, it could perform only during scheduled power outages, two of which the GSA rescheduled, delaying Aarow’s work. Aarow and Grunley submitted several change order requests to the GSA, seeking additional time and compensation for the delays. These requests sought $349,606---with $252,101 of that amount to go to Aarow. GSA granted the requests in part: It issued a unilateral contract modification that increased the prime contract price by $143,882---with $103,235 of that amount passed on to Aarow.

Although the GSA declared the project had reached “substantial completion” in March, 2015, Aarow’s work on the project was not fully completed until May 2016. In June 2016, claiming it hadn’t been paid in full for all labor and materials it contributed to the project, Aarow submitted a claim to Grunley for $246,093 in additional compensation. Subsequently, Aarow sued Grunely’s payment bond sureties, Continental Casual Company (Continental) and Liberty Mutual Insurance Company (Liberty), to recoup payment under the Miller Act.

Grunley filed a counterclaim against Aarow for breach of contract and damages for alleged overcharging on the project. The court dismissed Grunley’s counterclaim and granted Aarow’s motion for summary judgment regarding recovery for labor and materials.

‘Pay-when-paid’ clause can’t limit Miller Act claims

After receiving the $246,093 request from Aarow, Grunley passed through a claim to the GSA. The agency responded by requesting repayment from Grunley---in the amount of $43,194 ($26,778 in liquidated dama[..]