Louisiana subcontractor Gallo Mechanical, LLC filed a Miller Act Claim for over $3.1 million on a US Navy Project at Saufley Field in Pensacola, Florida.
Following an uptick in notable claims on federal property throughout 2021, issues with government-funded projects continue to pile up — a major area for concern with billions in government construction spending around the corner.
The work in question relates to renovations on Saufley Field’s Building 603, with Gallo Mechanical serving as a subcontractor for joint venture Orocon-Carothers (OCJV), a partnership between Orocon Construction, LLC and Carothers Construction, Inc.
Gallo Mechanical’s original subcontract dates back to September 30, 2014, with the total cost of the company’s services coming to $5,679,550 for mechanical and plumbing work on the project.
However, Gallo Mechanical’s work was allegedly held back significantly, with the company alleging “constant delays, disruptions, and impacts,” which “caused Gallo to incur significant expenses that it has not been compensated for to date.”
“Commencement of Gallo’s work on the Project was delayed for nearly two years,” the company’s lawsuit says, “causing Gallo to incur substantial expenses related to escalation costs, supervision costs, and other direct and indirect expenses that would not have been incurred but for the delay.”
As per the lawsuit, Gallo Mechanical wasn’t able to commence work on the project until January 30, 2017. Allegedly, this caused the company to sustain damages totaling $2,606,782.60. The company claims in the lawsuit that it had submitted numerous Requests for Equitable Adjustment (REAs) to OCJV in order to substantiate its damages, with the most recent REA being submitted on April 1, 2021.
In 2017, 2018, and 2020, Gallo Mechanical notified OCJV of issues across the project that caused delays. According to the company’s lawsuit, equipment warranty coverage gaps, chiller plant maintenance costs, and impacts stemming from the COVID-19 pandemic all impacted the project and caused financial damages.
A number of issues have hampered Gallo Mechanical’s ability to get full payment, as Gallo is seeking compensation for change orders, the remaining contract balance, and its submitted REAs due to the aforementioned delays and other onsite issues.
It has allegedly yet to receive $123,656 of its originally-owed contract amount on top of the $2,606,782.60 in claimed damages; additionally, the company claimed that it submitted requests for change orders coming to $396,084.25 after performing extra work on the project. In total, Gallo Mechanical claims that it is owed $3,126,522.85.
Despite the difficult situation, OCJV has a strong history of working on federal projects — especially so in the case of Orocon Construction.
According to Orocon Construction’s featured projects, OCJV has worked on at least five federal facilities, receiving contracts totaling upwards of $103 million, while Orocon Construction has handled a number of other such projects.
Miller Acts claims are an effective tool for subcontractors and suppliers
Though Gallo Mechanical is certainly in a difficult position, it isn’t alone. Recent Levelset coverage has focused on a number of Miller Act claims filed with significant possibilities for long-term impact on future government projects. May 2021 saw a contractor act after going without $3.16 million in payment after working on a Washington State naval base, while a Florida-based contractor filed a $10 million Miller Act claim on the US government’s controversial Guantanamo Bay prison facility in July 2021.
All payments made related to federal construction work are regulated by the Miller Act, which requires that the general contractor of a federal construction project has to furnish a payment bond and performance bond to the federal government. The payment bond is for the benefit of subcontractors and suppliers, guaranteeing that they’ll be paid for their labor and materials — as well as keeping subcontractors from making lien claims on government property.
However, as Levelset’s Jonny Finity adds, these protections actually don’t extend to the project’s general contractor, and “Additionally, the Miller Act does not protect subcontractors or suppliers lower than the second tier.”
“This means that first-tier contractors, second-tier subcontractors, first-tier suppliers (those suppliers under contract with the general contractor) are all covered by the Miller Act if they encounter a payment issue while working on a federal construction project,” Finity wrote.
Miller Act claims are very powerful, as well: Construction attorney Matt Viator added that “The Miller Act is intended to be broadly interpreted in order to provide the utmost protection to those who furnish labor or materials. For this reason, Miller Act claims are not easily tossed aside. Courts are also prejudiced against contracts that alter a claimant’s right to a Miller Act claim.”
It’s important for contractors on projects like this to understand the difficulty of such claims, though, and especially those involving joint ventures and possibly shifting roles on projects. As Levelset’s Nate Budde reported, a US District Court case in 2014 covered who was actually eligible to file a Miller Act claim, establishing the importance for contractors to understand their roles on such projects.