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UNITED STATES EX REL. HUSSMANN CORP. v. FIDELITY &

March 30, 1998

UNITED STATES OF AMERICA for the use and benefit of HUSSMANN CORPORATION, Plaintiff,
v.
FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Defendant.



The opinion of the court was delivered by: IRENAS

 IRENAS, District Judge:

 I. BACKGROUND

 On July 1, 1994, the Defense Commissary Agency, AETC/LGCR Contracting Squadron ("DeCA") issued an Invitation For Bid ("IFB"), soliciting the services of prime contractors for the construction, renovation and complete alteration of a new supermarket to be built within the Commissary building at McGuire Air Force Base in Wrightstown, New Jersey (the "Commissary"). Craddock Aff. at P 8; Exh. A to Craddock Aff. The supermarket was to be a large facility with over twenty check-out counters. St. Lawrence Aff. at P 5. Building the new supermarket required new renovations to an existing Commissary facility and the installation of a new product refrigeration system within the facility itself. Craddock Aff. at P 7.

 In response to DeCA's IFB, C. Pyramid prepared and submitted an August 23, 1994 bid to perform the construction, renovation and complete "refitting" of the supermarket within the Commissary. Craddock Aff. at P 11; Exh. C to Craddock Aff. As C. Pyramid was the lowest responsible bidder, DeCA issued a Notice of Award to C. Pyramid for the Commissary project on October 12, 1994. Exh. D to Craddock Aff. C. Pyramid thereafter became the prime contractor on BBA Project Number 795.04 (the "Government Contract"). As required by § 270a of the Miller Act, Fidelity & Deposit became C. Pyramid's payment and performance surety. Craddock Aff. at P 2.

 After C. Pyramid was awarded the Government Contract, Mark Craddock, C. Pyramid's Senior Vice President, began negotiating the terms of an agreement for the design, engineering, and manufacturing of all refrigeration equipment to be installed at the Commissary with representatives of Tyler Refrigeration, Hill Refrigeration and Hussmann. Craddock Aff. at P 13. As a result of Hussmann's 60 years of experience in the refrigeration industry and C. Pyramid's belief that Hussmann would best be able to provide technical support and consulting guidance, C. Pyramid chose to use Hussmann as the supplier of refrigeration equipment needed under the Government Contract. Craddock Aff. at P 15.

 On October 27, 1994, C. Pyramid and Hussmann entered into a written agreement in the form of a purchase order (the "Purchase Order") whereby Hussmann agreed to supply certain commercial refrigeration equipment to C. Pyramid for the price of $ 700,000. Smith Aff. at P 5. The Purchase Order states, and the parties essentially agree, that Hussmann's contractual obligations included the design and manufacturing of (1) the product refrigeration system, (2) the refrigeration unit coolers, (3) the air cool condensers, (4) the compressor systems, (5) the insulated cold storage rooms, and (6) a refrigeration monitoring system. Purchase Order, Exh. E to Craddock Aff. The parties dispute, however, whether Hussmann had any further obligations pursuant to the Purchase Order. Hussmann shipped the refrigeration equipment specified in the Purchase Order directly to the Commissary, care of C. Pyramid, as required under the Purchase Order. The equipment was shipped on the following dates: Racks/Refrigeration Machines March 31, 1995 Condensing Units April 19, 1995 Coolers September 13, 1995 Cases April 25, 1995 September 13, 1995 October 6, 1995 November 14, 1995 Evaporator Coils February 14, 1995 Condensers/Roof Equipment April 5, 1995 Comtrol Controls May 4, 1995 Miscellaneous Buyouts November 8, 1995

 In the summer of 1996, C. Pyramid requested the close-out items under the Purchase Order. Hussmann states that close-out items are typically provided as the final step in an "Equipment Only" job, and claims that under the Purchase Order, the close-out items consisted of operation and maintenance ("O&M") manuals for the refrigeration equipment, final drawings of the refrigeration equipment as installed at the Commissary, and on-site equipment service and maintenance training. Smith Aff. at P 11. Fidelity & Deposit disputes that the supply of closeout items comprised the final step of the Purchase Order. Although the Purchase Order does not expressly state that O&M manuals or any other close-out items must be supplied as the final step under the contact, it does include a provision referencing a specification of the Government Contract which discusses operating and maintenance instructions. The first page of the Purchase Order states "ALL MATERIALS TO CONFORM TO SPEC. SECTIONS" followed by various specification section numbers. One of the numbers listed, 15688, has a section, "§ 1.06. Operating and Maintenance Instructions," which details the operating and maintenance instructions required by the government. Section 1.06 states:

 
A. . . . . The instructions shall include, but shall not be limited to, the following:
 
1. System layout showing piping, valves, and controls. One set of reproducible (mylar type) Record Drawings shall be provided for local engineer files, one set shall to [sic] go to HQ DeCA/DFDM
 
2. Approved wiring and control diagrams with data to explain the detailed operation and control of each component. Include interface and connection to the refrigeration monitoring control systems (RCMS).
 
3. A control sequence describing system start-up, operation and shut-down.
 
4. Operating and maintenance (including lubrication) instructions for each piece of equipment.
 
5. Display case manufacturer's bulletins, catalogue cuts and descriptive data, installation and operation data.
 
6. Parts lists and recommended spare parts.
 
7. Warranty certificates for compressors, display cases, etc. including procedures for getting warranty items replaced.
 
8. Approved pressure control settings, refrigeration schedule and refrigeration circuit layout drawings of the entire system and layout drawings on RCMS, framed under laminated plastic, shall be posted, in the Refrigeration Equipment Room where directed by the Contracting Officer. Drawings shall be fixed so that they will not fade. The framed drawings shall be posted before acceptance testing of the systems.

 B. Instructions to Contracting Officer's representatives: The instruction shall be conducted within 45 days after final acceptance of the system. The instruction (8 hrs) shall be conducted at the commissary by te display case manufacturer. . . .

 Exh. B to Hussmann Reply Br.

 In a letter dated July 17, 1996 and addressed to Hussmann Contract Administrator Jack Brown, C. Pyramid Project Coordinator Ray Muller requested that Hussmann provide the project close-out items, specifically referencing the O&M manuals and operating instructions as per spec. number 15688:

 
It is now approximately 45 days prior to completion of our contractual work and therefore we request that all manuals and operating instructions etc. as per Spec. sect. 15688-4 [§ 1.06] Par. A and B, be submitted . . . . Jack, it is important that you confirm in writing, your forwarding of manuals, and a date when you intend to hold instructional period so that personal [sic] who will be responsible for maintenance and operation can be made available.

 Supp. Smith Aff. at P 13; Exh. G to Supp. Smith Aff. On the same day, July 17, 1996, Mr. Smith sent a response letter to Mr. Muller stating that "Hussmann is prepared to provide the project close-out services to you as soon as the items of payment, warranty claims and final payment to Hussmann can be agreed upon." Supp. Smith Aff. at P 14, Exh. H to Supp. Smith Aff.

 On July 18, 1996, Mark Craddock of C. Pyramid sent a letter to Dave Smith of Hussmann stating:

 
We have always maintained that to date, we have never received all materials required by the contract, and your personnel continue to promise us that all materials are firth coming [sic] . . . . C. Pyramid's procurement of these products will fall under P 8 Remedy for Delays and Default. . . . Additionally, you are responsible for services under this contract. Your refusal to provide O&M Manuals and training as set forth in the contract due to a dispute over cost and backcharges or trying to force us to settle under your terms will not be tolerated by C. Pyramid Enterprises Inc.

 Exh. I to Supp. Smith Aff.; Supp. Smith Aff at P 15. By letter dated July 22, 1996, Mr. Smith responded to Mr. Craddock's letter, stating:

 
We have not refused to provide any material required by the construction documents. To date, we have not received an official punch list with a list of deficiencies or shortages.
 
We have not received field mark-up of shop drawings for as built drawing preparation. (A part of O&M manuals) . . .
 
In order for Hussmann to provide the project close-out materials/services, we will require the following at your earliest convenience:
 
1. Marked shop drawings indicating Field Changes
 
2. Date for training (if Hussmann is to pick dates, please advise)
 
3. Payment for a substantial portion of your account balance . . . .
 
We have given our full support to you on this project and nothing that we have done has served to jeopardize the completion of this project. . . . It is our desire to see that this project is brought to a successful completion, but it is your company that is in default in its obligations to Hussmann, and if necessary, Hussmann will pursue legal options available to us to see that we are fully paid.

 Exh. I to Supp. Smith Aff. On September 9, 1996, Mr. Craddock sent Mr. Smith a letter purporting to "summarize the present status of [C. Pyramid's] backcharges and payment withholdings" totaling $ 81,239.54 on the ...


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