Paul Hardeman, Inc. v. Arkansas Power & Light Company

• Court: U.S. District Court — Eastern District of Arkansas
• Writing for the Court: E. B. Dillon, Jr., House, Holmes & Jewell, Little Rock, Ark., for Ark. Power & Light Co
• Citation: Paul Hardeman, Inc. v. Arkansas Power & Light Company, 380 F. Supp. 298 (E.D. Ark. 1974)
• Decision Date: 14 June 1974
• Docket Number: No. LR-65-C-66.,LR-65-C-66.
• Parties: PAUL HARDEMAN, INC., Plaintiff, v. ARKANSAS POWER & LIGHT COMPANY, a corporation, Defendant, The Aetna Casualty & Surety Company, Additional Counterclaim Defendant.

380 F. Supp. 298

PAUL HARDEMAN, INC., Plaintiff, v. ARKANSAS POWER & LIGHT COMPANY, a corporation, Defendant The Aetna Casualty & Surety Company, Additional Counterclaim Defendant.

No. LR-65-C-66.

United States District Court, E. D. Arkansas, W. D.

June 3, 1974.

As Amended June 14, 1974.

COPYRIGHT MATERIAL OMITTED

E. L. McHaney, Owens, McHaney & McHaney, Little Rock, Ark., for plaintiff.

E. B. Dillon, Jr., House, Holmes & Jewell, Little Rock, Ark., for Ark. Power & Light Co.

Bill S. Clark, Smith, Williams, Friday, Eldredge & Clark, Little Rock, Ark., for Aetna.

MEMORANDUM OPINION

EISELE, District Judge.

Background of Controversies^*

Around 1960 the officials of a group of electric utility companies operating in some six states began looking into the possibility of a diversity interchange between the Tennessee Valley Authority (TVA) and those utility companies. It was thought that this could be carried out through the construction of a network of extra-high voltage transmission lines (EHV) connecting the TVA system with the systems of the utility companies. Studies had indicated that the costs of the EHV facilities were sufficiently lower than the costs of creating an equivalent amount of new generating capacity to suggest that the diversity interchange was the better approach.

On August 8, 1962, eleven electric utility companies, identifying themselves as the South Central Electrical Companies (SCEC), entered into an agreement with Commonwealth Associates, Inc. (CAI) of Jackson, Michigan, to assist in the planning of the proposed facilities. In performing such duties CAI conducted a study of an 1,100-mile grid of EHV transmission lines. Subsequently, the SCEC companies decided to build the grid, and the defendant, Arkansas Power & Light Company (AP&L), procured the services of CAI to design the portions thereof in which it was interested, to receive and evaluate bid proposals, to recommend the contractor to be employed, and to assist in the letting of the various contracts which would be required. CAI was also employed to provide the engineering and inspection services which would be needed during the construction.

This lawsuit arises out of the circumstances attending the bidding for, and work on, the first segment of the SCEC grid, which was to run from the Mississippi River to Mabelvale, Arkansas, approximately 139 miles, exclusive of river crossings.

On March 7, 1964, CAI forwarded bid documents to some 16 prospective bidders, including the plaintiff, Paul Hardeman, Inc. (PHI), with instructions that sealed bids should be submitted on or before March 23, 1964. The bids were for the construction of a single circuit, 500 KV electrical transmission line from the Mississippi River near West Memphis, Arkansas, to Mabelvale (near Little Rock), Arkansas. The bid proposal divided the work into 176 items, or units of work. The bid would show a price for each item or each unit of work. The quantity of each unit or item of work was estimated. The bid proposal contained the following provision:

"Enclosed herewith is a Bid Bond in the amount of $300,000, which is submitted as a guaranty of the good faith of the bidder and that bidder will enter into a written Contract, in the form of the Agreement bound with the Specifications, to do the work should the award be made to him; and it is hereby agreed that if, at any time, other than as provided in the Proposal, the undersigned shall withdraw his Proposal, or shall fail to execute the Contract and furnish satisfactory Bond, as herein provided, the Owner, in either of such events, shall be entitled and is hereby given the right to retain the Bid Bond, Cashier's Check, or Certified Check (strike those not applicable) as liquidated damages. If award is not made to the undersigned bidder, then the enclosed Bid Bond, Cashier's Check, or Certified Check (strike those not applicable) shall be returned by the Owner to the Bidder in accordance with the Instructions to Bidders."

In response to the invitation, the plaintiff and seven other contractors submitted bids for the performance of the construction work.

The original bid proposals were sent to CAI at its Jackson, Michigan office, and copies thereof were sent to AP&L at its offices in Pine Bluff, Arkansas. The bids were opened in private, and the amounts of the bids were not publicized or otherwise made known to the bidders.

Eight bids were received, on or about March 23, 1964, as follows:

Paul Hardeman, Inc
                Stanton, California                 $2,704,738.00
                R. B. Stovall Construction Company
                Dallas, Texas                       $3,809,911.26
                Foley-Jelco
                Salt Lake City, Utah                $3,840,276.50
                Commonwealth Electric Company
                Lincoln, Nebraska                   $4,528,593.00
                L. E. Myers Company
                Chicago, Illinois                   $5,515,967.15
                R. H. Bouligny
                Charlotte, North Carolina           $5,997,710.00
                Power Constructors, Inc. &amp
                Power Engineering Company
                Topeka, Kansas and
                Sioux City, Iowa                    $7,514,131.00
                T. D. Bross Line Construction
                Company, Hartford, Connecticut      $7,773,143.00
                

These bids vary from a low of $18,826.00 per mile (the bid of PHI) to $53,129.00 per mile.

On March 26, 1964, PHI was informed by telephone that it would be awarded the contract. A confirming letter was mailed on March 26, 1964, and the acceptance of PHI noted thereon on March 30, 1964. A formal contract was executed by the parties on April 1, 1964, showing a total contract price, based upon estimated quantities, of $2,704,738.00. A construction bond in the amount of $2,705,000.00 was issued by the Aetna Casualty and Surety Company (Aetna).

In the early part of April, 1964, PHI commenced activities in connection with the performance of the work required.

The contract contains the following provision:

"If the work to be done under this Contract shall be abandoned by the Contractor, or if this Contract shall be assigned, or the work sublet by him without the permission of the Owner, or if he be placed in bankruptcy, or if a Receiver be appointed for his properties, or he shall make an assignment for the benefit of creditors, or if at any time the Engineer shall be of the opinion that the schedule of work is not being maintained or that the Contractor is violating any of the conditions or agreements of this Contract, or is executing said Contract in bad faith or not in accordance with the terms thereof, the Owner may notify the Contractor to discontinue all work under this Contract by written notice to be served upon the Contractor, a copy of which notice shall be given to the Surety may, at its option, assume the date of such notice, the Contractor shall discontinue the work, whereupon the Surety may, at its option, assume this Contract and proceed to perform the same. The Surety, in such event, shall take the Contractor's place in all respects and shall be paid by the Owner for all work performed by the Surety in accordance with the terms of this Contract. In case the Surety does not, within two weeks after the date of the Owner's notice to the Contractor to discontinue work, exercise its right or option to assume this Contract, then the Owner shall have the power to complete the work herein described by contract or otherwise, as it may determine, and the Contractor agrees that the Owner shall have the right to take possession of and use any of the materials, plant, tools, equipment, supplies, and property of any and every kind provided by the Contractor, and the expense so charged shall be deducted by the Owner out of such moneys as may be due or may at any time thereafter become due to the Contractor. In case such expense is more than the sum which would otherwise have been payable under the Contract, then the Contractor shall pay the amount of such excess so due. The Owner shall not be required to obtain the lowest figures for the work of completing the contract, but may make such expenditures as in its sole judgment shall best accomplish such completion."

In late November, 1964, AP&L received a letter from CAI, the first paragraph of which states:

"Commonwealth Associates, Inc., as the Engineer referred to in Article 27 of the General Conditions in your contract with Paul Hardeman, Inc. for construction of a 500 KV Transmission Line, is of the opinion that the schedule of work set forth therein is not being maintained, that many of the conditions and agreements of this Contract are being violated, and that the Contract is not being executed in accordance with the terms thereof."

On November 28, 1964, AP&L wrote PHI the following letter:

"Pursuant to paragraph numbered 27 of the General Conditions which constitute a part of that certain contract between the undersigned and you dated March 30, 1964, for the construction of the Mississippi River-West Memphis-Mabelvale Single-Circuit 500 KV Transmission Line, we hereby notify you to discontinue all work under the said contract. This notice is given as a result of the opinions of Commonwealth Associates, Inc., the Engineer designated in the contract. The Engineer is of the opinion that the schedule of work is not being maintained and at the present rate of progress the work will not be completed within the contract time; that you have been and are violating many of the conditions and agreements of the Contract and Contract documents; and that you are not executing the Contract in accordance with the terms of the Contract. A copy of the letter of the Engineer expressing these opinions is attached.

"You are hereby directed to deliver to this company all of the materials, plant, tools, equipment, supplies and property of any and every kind which have been provided by you for the purpose of the work under the afore-described Contract so that the same may be used in the completion of the work. In addition, you are directed to deliver to us all material provided for us and received by you for incorporation in this work."

PHI responded with the...