Suffolk Construction Company, Inc. is being sued for its failure to complete its work on the newly developed Children’s National Research and Innovation Campus on the grounds of the former Walter Reed Army Medical Center.
On July 26, 2021, a lawsuit was filed by Children’s National at Walter Reed, LLC and three affiliated companies that collectively represent the Children’s National project.
According to documents, the legal action has also come out of Suffolk Construction’s “wrongful filing of mechanics liens against the property” — noting that Children’s National “has sustained damages of not less than…$3.06 million, plus the costs, in excess of $131,050, arising from Suffolk’s wrongful lien claims.”
As per Children’s Hospital, the project — which was developed starting in 2016 from 11.85 acres of the former Walter Reed Army Medical Center — “consists of…state-of-the-art research laboratories…a 300-seat conference theater…facilities for providing outpatient care services to children and adolescents…clinical services for Children’s Rare Disease Institute…[and an] ADA-compliant, 960-space parking garage.”
Children’s National alleges it was misled over Suffolk Construction’s preparedness
Suffolk Construction’s two separate contracts for the project — with the first focused on hazard abatement services and the second involving a significant amount of pre-construction services — date back to April 6, 2018, and July 9, 2018, respectively.
The pre-construction work in Suffolk Construction’s contract is extensive, as it includes aspects of cost estimation, design options, and engaging with other mechanical, plumbing, and electrical contractors in order to manage the scope of the project.
However, Children’s National notes that Suffolk Construction’s earlier hazard abatement and pre-construction work provided it “an opportunity to gain particular insight into Children’s National’s priorities, the elements of the renovation design, its constructability, and the challenges that the project would present” — adding that “In short, as compared to other contractors who would be invited to bid for the construction work, Suffolk had a substantial ‘leg up.’”
Despite this, Children’s National noted that it felt that Suffolk Construction had taken advantage of goodwill stemming from its prior work and failed to continue its work upon signing new construction contracts: “From the start, [Suffolk Construction] failed to perform in accordance with the Baseline Project Schedule that it established.”
Suffolk Construction allegedly failed to achieve significant milestone dates
The building of four major structures for the medical center — the primary care center, research laboratories, auditorium, and parking garage — were all scheduled for substantial completion between April 16, 2020, and April 30, 2020, with some needed for health department inspection or move-in in July 2020 and December 2020.
Learn more – Substantial Completion in Construction: Why It Matters
However, it quickly became clear that these timing goals were unlikely to be met. Despite Children’s National’s disappointment with the work done early on in the project, Suffolk Construction reportedly “repeatedly assured Children’s that the lost time would be recaptured through resequencing activities” — a claim that was outbalanced by the company’s early 2020 admission that it would not achieve the project’s milestone dates.
According to Children’s National, when initial health measures to address the COVID-19 pandemic were put in place for the project on March 13, 2020, “the project was little more than 50% complete” by Suffolk Construction’s own admission, despite major milestones coming in the following month.
Though many contractors struggled with projects during the COVID-19 pandemic, lawsuit documents note that, in fact, the pandemic had a “limited effect” on the project’s work. Instead, Children’s National alleges that the same mismanagement and inefficiency that was occurring prior to the pandemic continued throughout 2020 and 2021.
Construction delays are fairly common, especially when it comes to delays outside of a contractor’s control. Most contracts include force majeure clauses — contractual provisions that relieve a party’s obligations when circumstances beyond the party’s control arise — that would assist a contractor in the event of something
(like a pandemic) impacting their work.
It’s important to distinguish between delays that are out of a party’s control, and those that are within a party’s control — like in the case of Suffolk Construction’s admission of being far behind schedule. According to Children’s National, Suffolk Construction didn’t achieve substantial completion until March 2021 — a full 11 months after the original dates — along with “an extensive punch list of items to be completed and many others to be corrected.”
As of July 2021, the research facility had still not completed mechanical commissioning and was not ready for any move-in.
Despite payment leniency, Suffolk Construction filed mechanics liens “without any good cause”
Children’s National notes that even though it was adversely impacted by the almost year-long delay on the project, it decided not to deduct liquidated damages from Suffolk Construction’s payment — damages which had reached the contractual limit of $3.06 million by late 2020. Instead, the hospital continued to timely pay Suffolk Construction the full amount of its contracted payments.
Despite this, on June 21, 2021, the contractor filed four mechanics liens against the project totaling $13,105,669, claiming nonpayment on the project. The research laboratory — still unfinished — had the largest lien filed on it by far, coming to $11,549,430.
According to Children’s National, the company has refused to provide the details of the liens’ amounts. The hospital claims that the liens reflect amounts that have already been paid or are otherwise not owed, making them “an unjustified, wrongful and tortious cloud on [th title of the ownership entities.” It notes that it has been damaged to an amount of at least $131,050 by the filings.
Due to this, the hospital is requesting to have the liens removed, and to receive $3.06 million in liquidated damages and $131,050 in compensatory damages after Suffolk Construction’s alleged “malicious conduct.”
Contractors have faced payment issues with multiple projects involving government-related facilities
Though the Children’s National hospital system isn’t run by the federal government — it’s affiliated with Howard University and George Washington University — the project in dispute was developed from the federal Walter Reed Army Medical Center site, and it’s not the only recent large-amount dispute over government-related sites.
In July 2021, Florida contractor Ion Electric LLC filed a Miller Act claim seeking nearly $10 million in non-payment after performing work on the NAVFAC Naval Station Guantanamo Bay Cuba W.T. Sampson School, with damages stemming from an outside general contractor’s failure to pay.
In April 2021, a similar situation arose when Washington State-based contractor Harris Pacific Northwest, LLC filed a Miller Act claim alleging non-payment of $3.16 million stemming from its work as a subcontractor participating in upgrades on a United States naval base after it was not fully paid for its work by the federal government.