FEMA Withheld Project Approval, So County Withheld Payment

Friday, February 23, 2018 5:23 am
March 2018 - Volume 46 Number 3

A trial court awarded a Texas county $400,000 in damages after its contractor refused to return to a FEMA-funded firehouse construction project following a work stoppage. But that verdict didn’t stand on appeal since, prior to that, the county failed to pay for work performed.

Facts: Chambers County, Texas contracted with Pelco Construction Company (Pelco) to rebuild a firehouse. The project was to be funded by the Federal Emergency Management Agency (FEMA), but at some point after performance had already begun, Pelco was ordered to stop work because FEMA hadn’t yet approved the work. The parties never successfully resumed their relationship. Pelco filed suit to recover amounts owed for work already completed. A trial court granted summary judgment against Pelco on its breach of contract and Prompt Payment Act claims, and awarded $400,000 in damages to Chambers County. On appeal, that decision was reversed and remanded for a new trial.

During the course of its work, Pelco submitted three invoices to Chambers County. The county paid 90 percent of the amounts owed on the first two and never paid the third. Chambers County presented three arguments for why withholding 10 percent was not a contract breach. The Court of Appeals of Texas, First District, Houston rejected all three.

Analysis: First, the county claimed it was obligated to pay only the amount certified by the project architect, which had cert[..]