Contractor’s Third Party Beneficiary Claim Dismissed Against Designer Where Designer’s Contract with Owner Lacked Clear Intent to Benefit the Contractor

Arco Ingenierosm, S.A. v. CDM Int’l Inc., Civil Action No. 18-12348-PBS, 2019 BL 100779 (D. Mass. Mar. 22, 2019)

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Luke Nicholas Eaton

In November 2009, Tropical Storm Ida hit El Salvador, causing flooding, landslides, and the destruction of homes, roads, bridges, schools, health clinics, and other infrastructure.  The United States Agency for International Development (“USAID”) provided $25 million in funding to rebuild damaged infrastructure.  USAID retained Defendant CDM International Inc. (“CDM”) to conduct studies and assessment for the construction of eight schools and one health clinic (the “Projects”) and to create preliminary designs and technical specifications for these Projects.  These preliminary designs were intended to constitute at least thirty percent of final designs for the Projects.  Relying on the preliminary designs created by CDM, Plaintiff Arco Ingenieros, S.A. de C.V. (“ARCO”) submitted bids to act as the design-build contractor for the Projects.  USAID awarded the Projects to ARCO.

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U.S. Court of Claims Denies Contractor’s “Superior Knowledge” Claim Against Owner Despite Owner’s Withholding of Reports That Would Have Revealed to Contractor Extent of Subsurface Deterioration of the Wharf to be Reconstructed

RDA Constr. Corp. v. United States, No. 11-555 C, 2017 U.S. Claims LEXIS 875 (Fed. Cl. July 27, 2017)

This case arises out of a public construction project at the Newport Naval Station.  The Naval Facilities Engineering Command (“NAVFAC”) contracted with RDA Construction (“RDA”) for the demolition, removal and reconstruction of a fifty-year-old deteriorating wharf and bulkhead.  The wharf was supported by 248 steel H-pile beams, encased in concrete and driven into the sea floor.  In 2005, NAVFAC commissioned the Appledore Report which found that these structures exhibited advanced deterioration, much of which could only be observed during underwater inspection and could not support any vehicular loads.  A second report, commissioned in 2008, recommended that the structure not be used during its reconstruction.

In May 2009, NAVFAC issued its project solicitation but did not disclose these reports or their findings.  Instead, NAVFAC invited bidders to the site and encouraged them to investigate it carefully.  Hazardous site conditions were marked with sawhorses, barriers and fencing.  After visiting the site, RDA submitted its bid and was identified as the apparent low bidder.  Two days later, NAVFAC notified RDA that its bid was “substantially lower” than NAVFAC’s estimate and requested that it review and confirm its bid and the scope of work.  RDA assured NAVFAC that it had made no mistakes and would honor its bid.  RDA then provided its technical and management plans to NAVFAC, noting that it planned to perform demolition work from the wharf using land-based equipment.  After receipt of these plans, NAVFAC awarded the contract to RDA; RDA signed the contract on October 13, 2009 and received its Notice to Proceed two days later.  In November, at a pre-construction meeting, RDA again explained its plan to use the wharf during construction as a staging area for its excavators and demolition equipment.  NAVFAC personnel were “shocked” by this plan because the wharf was “condemned”  and subsequently provided RDA with the Appledore report.  Continue reading “U.S. Court of Claims Denies Contractor’s “Superior Knowledge” Claim Against Owner Despite Owner’s Withholding of Reports That Would Have Revealed to Contractor Extent of Subsurface Deterioration of the Wharf to be Reconstructed”