EC Ernst, Inc. v. Koppers Co., Inc.

• Decision Date: 13 August 1979
• Docket Number: Civ. A. No. 77-1045.
• Citation: 476 F. Supp. 729
• Parties: E. C. ERNST, INC., Plaintiff, v. KOPPERS COMPANY, INC., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

476 F. Supp. 729

E. C. ERNST, INC., Plaintiff, v. KOPPERS COMPANY, INC., Defendant.

Civ. A. No. 77-1045.

United States District Court, W. D. Pennsylvania.

August 13, 1979.

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Friedman & Gass, P. C., New York City, Baskin & Sears, Pittsburgh, Pa., for plaintiff.

Rose, Schmidt, Dixon, Hasley & Whyte, Pittsburgh, Pa., for defendant.

OPINION

SNYDER, District Judge.

This contract action between E. C. Ernst, Inc. (hereinafter "Ernst"), an electrical subcontractor, and Koppers Company, Inc. (hereinafter "Koppers"), the general contractor, arises out of a sophisticated multimillion dollar construction project (hereinafter "the Project") at the Aliquippa Works of the Jones & Laughlin Steel Corporation (hereinafter "J&L"). The matter was heard non-jury and requires interpretation and application of the Purchase Order (hereinafter "P.O.") awarded by Koppers to Ernst for the electrical work at the J&L coke oven battery A-5 being constructed to provide a unique method for preheating and delivering coal to furnaces for the production of steel. Many difficulties were encountered, ranging from the necessity of not interfering with J&L's plant operations, to the removal of price controls which delayed procurement of supplies, and involving numerous change orders during the entire construction period. At the same time, consideration had to be given by Koppers to the successes and failures being experienced at a "model" project being built almost simultaneously at Inland Steel, and being incorporated at Aliquippa.

As might be expected, each party blames the other for delays, for engineering failures, for lack of participation in necessary scheduling and coordination, and for inadequate personnel and supervision, particularly in light of the importance of prompt completion of the work. Ernst, having been paid the major portion of its contract, now claims $2,325,705 in Count I of its Complaint for additional expenses by reason of the voluminous changes in the scope of the work; $1,484,000 in Count II for extra labor resulting from the many drawing revisions; $9,581.64 in Count III for certain additional work performed at Koppers' direction; plus $60,430 admittedly retained by Koppers. Koppers counterclaims for $1,730,886 for support personnel it provided to complete the job on time, premium time paid to Ernst to prevent delays in the completion date (which it claims were due to Ernst's inefficiency), premium time paid for early check-out which had been delayed by Ernst, and an inefficiency charge for its employees who worked premium time.

I. FINDINGS OF FACT

COUNT I

1. Ernst is a District of Columbia corporation with its principal place of business located in Washington, D.C., and is qualified to do business in Pennsylvania. Ernst is engaged in industrial and commercial electrical construction work throughout the United States, with branch offices here involved in Pittsburgh and Ambridge, Pennsylvania.

2. Koppers is a Delaware corporation with its principal place of business in Pittsburgh, Pennsylvania, and is engaged, inter alia, in the business of concept and design engineering, and in general contracting services for heavy industrial organizations, such as the basic steel industry.

3. The amount in controversy here exceeds sums in excess of $10,000, exclusive of interest and costs.

4. In June of 1973, Koppers entered into an agreement with J&L to design, engineer, and construct on a "turn-key" basis an A-5 coke oven battery and related facilities at Aliquippa, Pennsylvania, to produce coke for use in the steel making process at a cost of $46,587,650, to be functional by June 17, 1975.

5. At the time of the J&L-Koppers Agreement, Koppers was constructing a coke oven battery of similar concept for Inland Steel in Indiana, and Koppers' specifications for the Project developed in April and May of 1973 were based on Koppers' own expertise, J&L input, the know-how developed from handling problems as they arose at the Inland site, and from experience gained from an experimental plant operating at Ironton, Ohio. The Inland design, and thus the J&L design, was unique in its method of preheating coal and charging the furnaces. It was Koppers' intention to utilize the Inland engineering as much as possible, and, indeed, much of the process engineering at the Project was taken from Inland. The J&L-Koppers Agreement, dated June 12, 1973, stated that Koppers would duplicate the work done by it at the Inland site. However, all parties contemplated changes for adaptation to the Project.

6. The coke battery at the Project differed from the conventional facilities by incorporating novel techniques. The ovens are similar to conventional facilities. The principal differences are the method of charging the ovens with coal and the preheating of the coal prior to charging. The process involved a structure known as a preheat facility. Crushed coal is taken from barges, on a conveyor and fed into coal storage bins located in the preheat structure. From there it is processed through a pulverizer which reduces the coal to dust size particles. The pulverized coal is then heated by blowing heated air through it to raise the temperature to approximately 500° F. The preheated coal is then fed into charging bins. In conjunction with the heating process, recovery techniques and equipment are used to remove coal dust from the heated air which is then recycled. This coal dust is added to the charging bins. The bins are then pressurized using steam, and the preheated coal is blown by steam through a pipe known as the charging pipe into the ovens. No leveling is required because of the fluid nature of the preheated coal. The remainder of the coking process is similar to the conventional method, with the exception that an advantage is realized from the preheated coal in that coking time is reduced.

7. Inland became operational in August of 1974, but changes continued to be made through August of 1975 in order to overcome experienced difficulties, all of which, to some extent, were reflected in changes at the Project.

8. The Project was not completed on the scheduled date of June 17, 1975, and the charge date of the battery occurred on January 1, 1976.

9. After entering into the Agreement with J&L, Koppers immediately undertook the initial steps for demolition of existing facilities and relocation of utility lines. Concurrently, Koppers' engineers commenced the design and engineering for the Project, while its Procurement Department began ordering equipment and materials as they were identified by the Engineering Department. This technique is known in the construction industry as the "fast track" method, its purpose being to reduce the time between conception and operation. Both Ernst and Koppers were familiar with, and had previously used, the fast track method.

10. Koppers' Engineering Department developed plans and specifications for the work to be subcontracted, including the installation of the electrical materials. On January 11, 1974, an electrical bid package containing specifications, drawings, equipment lists, arrangement and single line drawings, flow diagrams, instructions to bidders, and other materials was issued to prospective bidders.

11. Koppers separated the electrical work into various work areas, such as wet coal handling, preheat, and the like. When the initial package was issued, drawings and other information were not yet available for all work areas, and the bidders were asked to submit quotes on each of the areas as completed.

A. The Purchase Order

12. On April 25, 1974, Ernst made a bid on the electrical work of $3,356,800. The resultant subcontract was based on a Purchase Order issued by Koppers to Ernst on June 4, 1974, Purchase Order No. 2463-2-002.

13. A variety of reasons, which will be described later in greater detail, contributed to an increase in the cost of the Project and an extension of Ernst's performance date beyond the targeted charge date of June 17, 1975. Essentially, it was changes dictated by the experience at the Inland site, requests from J&L, and coordination and engineering failures on Koppers' part that eventually increased the estimated man hours by more than 100%.

14. The price of materials and fabrication rose dramatically during the construction period, when nationally fixed price controls were lifted, increasing the final costs.

15. As a result of the lifting of price controls, delays were encountered in obtaining materials, primarily structural steel, and many suppliers and fabricators were unable or unwilling to meet delivery dates and prices which had been agreed upon earlier. We find, however, that the lifting of Federal price controls did not create an unforeseeable major difficulty which would excuse Koppers' late performance in the procurement of machinery and equipment.

B. Trade Interferences

16. In order to qualify for an investment tax credit, J&L demanded that the facility be operative by January 1, 1976. To meet this deadline, Koppers and its subcontractors were required to complete a project which had been expanded 70% in scope, in a time framework expanded only 27%; a "crash program" was created to complete the job.

17. The Engineering Department of Koppers was 15.7 weeks late in developing final drawings, causing further time constraints.

18. As a result of the crash program, 654,000 hours of direct labor were added by the Koppers' forces, originally projected at 928,000 (including 110,000 man hours anticipated for electrical work); this work was performed by over 450 men of various trades. More than two-thirds of this was committed in the last six months of the Project; half of Ernst's work was performed in the last six months.

19. This crash program resulted in delays to Ernst caused by trade interferences, both from other trades, the so-called "stacking of trades", and from being...