Contractor sues city over unpaid interest from public works contract

A Huntingdon Valley, Pa. contracting firm that did municipal work three years ago is suing the City of Philadelphia for interest it claims it is owed after the city failed to amend the construction company’s public works contract in a timely manner.

Philadelphia attorney Christopher I. McCabe, of the law firm Jacoby Donner, P.C., filed the civil action May 31 at the Philadelphia Court of Common Pleas on behalf of Carr & Duff, Inc.

The Montgomery County-based construction firm entered into a public works contract with the city in 2007 to perform work on phase two of the Center City Signal Improvement Project, according to the complaint. The contract price was $16,996,710.44 with a “contract limit” of $17,920,150. The contract also had a contingency amount of $923,439.56 for change orders.

Carr & Duff commenced its work around March 2008, the lawsuit states. As of Dec. 1 of that year, change orders approved and signed off on by the Streets Department totaled more than $2.5 million, requiring a contract amendment of more than $1.6 million.

According to the complaint, the city did not take the steps to alter the contract to increase its limit by that time, and the construction firm finished its work in August 2009 without having had an amended contract.

At the time of completion, the city had signed off on change orders totaling more than $2.7 million.

As of mid July 2009, the city had paid Carr & Duff an amount $7,000 less than the contract limits, the suit states, although Streets Department officials knew a contract amendment was still needed to compensate the construction company for the amount in the city-approved change orders, the lawsuit states.

In the ensuing months, the company still awaited word from the Streets Department on the discrepancy, the complaint states. The Streets Department maintained it submitted a memo to the city’s Procurement Department regarding the matter, but that it hadn’t heard back from a representative.

Finally, in October 2010, after things were squared away on the city’s end, the city forwarded to the construction company a contract amendment to increase the contract limit amount by more than $1.8 million.

The lawsuit states that the city could have initiated the contract amendment process back in December 2008, or anytime thereafter, but did not.

In late 2010, attorneys for Carr & Duff contacted the city’s Law Department about a claim of unpaid interest from the city. In early 2011, that claim for interest on late payment was rejected by the city, the lawsuit states.

Based on a due date of Nov. 7, 2009, and a statutory rate of 10 percent per annum, the amount of interest owed to the plaintiff is $184,423.67, according to the lawsuit.

“The city has no legal justification for its refusal to remit interest to Carr & Duff on the late semi-final payments,” the lawsuit states. “The city is in breach of its statutory and contractual obligations to Carr & Duff.”

In addition to the amount of interest in question, the plaintiff also seeks an award of a penalty of 1 percent per month, along with attorney’s fees and other court costs.

The non-jury case is awaiting listing.

The case number is 110503336.