EMTA building with Pennsylvania Problem Project graphic

Erie, Pennsylvania has been making substantial improvements to its transit system since 2009, and the city has made headway on the final phase of expansion in a project that was expected to cost the transit authority a total of $60 million dollars. However, the future of the project — which many Erie officials view as a possibly “transformational” community center — may have hit a significant roadblock. 

October 18, 2021, saw Ohio-based contractor Mike Coates Construction Co., Inc. file a lawsuit against the Erie Metropolitan Transit Authority (EMTA) that could hold up future progress for the transit authority, alleging breach of contract and significant nonpayment stemming from a dispute over project delays during the EMTA expansion.

According to Mike Coates Construction — which served as the general contractor for the project after filling the same role on the project’s second phase of expansion — the project was delayed by over a year and a half. Allegedly, even though the company informed EMTA of the delays and additional work needed, EMTA has “failed and refused” to provide the contractor with proper change orders, forcing them to finance the work themselves.

Between both phases of the project, Mike Coates Construction worked on “the demolition of existing buildings and construction of a new bus storage building, [a] new administration and operations building, [a] new parking garage, [and an] exterior dual wet fuel dispensing station and island canopy.”

Despite original projections that had the project being completed within a few years — an October 22, 2017, report from the Erie Times-News noted that the project was expected to be completed “in the summer of 2019” — Mike Coates Construction claims that the actual completion date for the project was November 27, 2020.

This seems to be backed up by comments made by EMTA officials; Jeremy Peterson, EMTA’s executive director, said in September 2020 that “We are about 95 percent done with the project.”

As per the lawsuit, however, Mike Coates Construction claims it experienced “unexpected and uncontrollable delays, disruptions, and interferences impacting the timing and cost of the work, including, among other things, schedule impacts caused by EMTA and/or third parties and/or outside forces over which MCC had no control.”

According to the filing, a number of delays on the project were actually allegedly caused by EMTA. Mike Coates Construction claimed that, for example, dirt piles left on-site by EMTA caused a delay that ended up totaling 89 days. Additional delays involving other contractors, weather delays, procurement issues, and unforeseen site interference similarly contributed to the company’s claim.

Notably, the contractor claimed that it required an adjustment to the contract sum and was entitled to damages after the start of the COVID-19 pandemic resulted in a project shutdown for 41 days between March 21–May 1, 2020. 

It’s possible that the claimed delays due to the pandemic could be a legitimate point of contention between the two parties, and it’s worth noting that there could be some impacts in the near future on the ways that owners and contractors are structuring contracts. 

In Levelset’s webinar “How Covid-19 Has Changed Construction Contracts,” lawyer Amanda Kraft noted that “COVID has caused us to reevaluate the way that we contract both the terminology that we use and the manner in which we enter into negotiations with other parties.”

Kraft added that situations like that of this dispute could change major aspects of contracts — such as force majeure clauses — as they relate to the possibilities of the pandemic and what either party can claim, saying “the inability to be able to get insulation or windows, is that really a force majeure? That would just be an open-ended acts of God. That’s a little bit more unclear. And it’s probably going to depend on very specific case law in your state.”

In all, Mike Coates Construction is claiming that the project was delayed 588 calendar days and has yet to receive compensation for the charges incurred — which the company claims comes to $134,412.39.

Dispute hinges on allegations of substantial nonpayment, possibility of future work

Beyond these delays, Mike Coates Construction is also claiming that, despite submitting “regular pay applications” to EMTA, a large portion of its payment has been withheld. 

Including the disputed claim of additional compensation related to the delays, the company is alleging that EMTA owes $1,084,437.77 in total.

Though Mike Coates Construction may dispute this, EMTA could have a strong case for withholding payment

“Under Pennsylvania’s Prompt Payment Act, a government agency may withhold payment for good faith claims. Specifically, for ‘deficiency items’ according to the terms of the contract,” said construction attorney Alex Benarroche.

Benarroche added that final payment and retainage could be held back depending on the level of completion according to EMTA.

“If incomplete work remains, a government agency may continue to withhold retainage equal to 1 1/2 times the amount required to complete the work, as long as the amount is certified by the architect/engineer & supported by a detailed list of incomplete items of work and a reasonable estimate of completion,” he said.

It’s likely that the EMTA is going to work to resolve the dispute without any substantial problems, however. Officials and local leaders have spoken highly in the past of the possibilities that the new facilities contain for the Erie area, noting the importance of retail space for the expansion’s new spaces.

“It’s not just our expansion. This is going to be a community-based center,” former EMTA executive director Mike Tann said when Mike Coates Construction began its work in 2017. “It’s a place where people can access other places through public transportation. For example, people can come here, park, and enjoy the retail space in our parking deck or go to an event downtown. Or they can access any city bus from right here.”

John Buchna, executive director of John Buchna, the Erie Downtown Partnership, added that the expansion is “truly transformational. There are a lot of people already living in that area, and this provides additional parking and access to reliable, public transportation…And it provides additional access to food…It has all the components for a successful market.”