Pennsylvania-based manufacturing business Environmental Tectonics Corp. has filed suit against Ohio’s Shook Construction Company, alleging non-payment and other breaches of contract stemming from work done on an Indianapolis environmental testing facility.
The lawsuit, filed on April 29, 2021, follows a mechanics lien for $240,089 filed in February by Environmental Tectonics against the property at One Allison Way, Indianapolis, Indiana, which is still active. The manufacturer is asking the court for a minimum of $315,000 — the unpaid contract amount plus $75,000 for additional work, as well as prejudgment interest and other costs. If applicable, Pennsylvania’s Prompt Payment Act includes an interest penalty of 1% per month on construction payments that are wrongly withheld, in addition to attorney fees.
Environmental Tectonics’ lawsuit claims that it was hired as a subcontractor by Shook Construction in late 2019 to design and build environmental testing and simulation equipment to be used at a new facility for Allison Transmission, Inc., a manufacturer of automatic transmissions and hybrid propulsion systems for commercial vehicles.
Environmental Tectonics claims that testing and simulation equipment being used to Allison Transmission’s benefit by July 2020, but that its equipment was not formally accepted by Allison Transmission or Shook Construction until September 4, 2020.
Additionally, the lawsuit claims that Environmental Tectonics was forced to sustain additional costs and delays in order to accommodate the new facility’s operational needs, which included testing equipment out of sequence and being kept from using its onsite resources.
Despite the fact that in April 2021 Allison Transmission’s Program Manager indicated that the commissioned equipment was performing at a higher level than its expectations, Environmental Tectonics claims it has not been able to receive its final payment since the equipment was accepted in September 2020.
Environmental Tectonics’ original 2019 contract and its 2020 amendment entitled them to $3,303,390 from Shook Construction for the production of four air handling units and four fluid heating and cooling systems.
Following the completion of its initially-contracted work, a number of change orders were formally submitted by Environmental Tectonics for additional work and costs. On September 10, 2020, the final invoice was submitted to Shook Construction, totalling $240,089 — a total which, as of the lawsuit’s filing, had not been paid.
Contract issues may have held up payment
Between the submission of its final invoice and February 2021, Environmental Tectonics claims it had been attempting to negotiate the resolution of any contract issues between itself and Shook Construction, and that representatives for Shook Construction stated that they were also working to resolve these issues.
However, during this time, Allison Transmission and Shook Construction both began to raise concerns over warranty and technical issues in Environmental Tectonics’ work — concerns which Environmental Tectonics claims are at least partially the fault of the other companies.
The lawsuit claims that Shook Construction insulated valves and pumps in such a way as to greatly increase the cost of resolving warranty and technical issues, and that they refused to compensate Environmental Tectonics for the increased costs stemming from this.
Additionally, Environmental Tectonics claims that Shook Construction asked other contractors to prepare estimates of other additional issues surrounding Environmental Tectonics’ work on the project — estimates that it claims were purposefully inflated in order to justify non-payment in some fashion. Following these conflicts, Environmental Tectonics filed the aforementioned mechanics lien.
In the lawsuit, Environmental Tectonics points out its belief that the construction of the Allison Transmission facility suffered overruns in the project’s cost due to the COVID-19 pandemic and other issues which did not relate to Environmental Tectonics’ work — the scope of which, it claims, “was [only] a small portion of the overall facility construction project.”
The lawsuit notes that Shook Construction and Allison Transmission came to a settlement in February 2021 regarding Environmental Tectonics’ subcontract, but that the settlement’s terms were not revealed to Environmental Tectonics and have yet to impact its payment.
In light of the settlement and Shook Construction’s lack of payment, Environmental Tectonics’ lawsuit requests the payment of its final invoice, as well as a payment “in the amount of excess of $75,000 for additional work.”
Despite facility dispute, Allison Transmission sees small growth in Q1 of 2021
Even amidst the dispute with Environmental Tectonics and Shook Construction, Allison Transmission recently reported positive financial growth in the first quarter of 2021.
“Despite the severe disruptions to global supply chains that are currently impacting our end markets, customer demand is improving,” Allison Transmission President and Chief Executive Officer David S. Graziosi noted.
“I would like to once again express my deep gratitude to Allison’s employees, customers, suppliers and communities for their continued dedication and resilience during this critical period,” Graziosi said.
“Thanks to improving customer demand and a resilient outlook, […] [we] continue to fund significant investments in engineering research and development and capital expenditures to further position Allison to capitalize on meaningful growth opportunities across all of our end markets.”
Though Allison Transmission’s net sales in 2021’s first quarter were an 8% decrease from quarter one of 2020, they also constituted a 10% increase from the final quarter of 2020 — indicating positive recovery may be on the way for the company’s market.