United States ex rel JEMS Fabrication, Inc. v. Fidelity & Deposit Co. of Maryland, 2014 U.S. App. Lexis 8175 (5th Cir., April 30, 2014)
This dispute arises out of a construction project to renovate and redevelop pumping stations located at various sites along the Mississippi River. The U.S. Corp of Engineers entered into a contract with Benetech, LLC for the project. Benetech then entered into a subcontract with plaintiff JEMS, whereby JEMS agreed to supply custom-fabricated structural steel for use on the project. The contract amount, including approved change orders, was $2.38 million and required JEMS to provide shop drawings, materials and on-site labor.
JEMS delivered all of the shop drawings and most of the materials required by the subcontract. However, JEMS did not supply most of the on-site labor, as Benetech and JEMS agreed that Benetech would supply the labor to satisfy its self-performance obligations in its contract with the Corp of Engineers. JEMS and Benetech also agreed to a subcontract modification such that Benetech would purchase a custom building directly from JEMS’ subcontractor for $54,000. However, because of changes made by the Corp of Engineers, which were not incorporated into the subcontract, Benetech’s cost for the custom building was $147,000. Ultimately, Benetech paid JEMS just under $1 million for its work on the project and alleged that JEMS was not entitled to any additional payment. Benetech claimed that it was entitled to a set-off against any amount due under the subcontract because it had to purchase materials that JEMS should have supplied for the project.