Contractors Beware: Court Vacates $1 Million Award That Exceeded Government Contract Funding Authorization
By: Carleton O. Strouss, C. G. Bowman & George A. Bibikos, K&L Gates, Harrisburg
The United States Court of Appeals for the Third Circuit recently vacated a $1 million award to a contractor for extra work it performed on a moving services contract because the award would have exceeded the funding authorization of the project owner, Wayne Moving & Storage of New Jersey, Inc. v. The School District of Philadelphia.  The case is a cautionary tale for contractors and subcontractors. In it, a subcontractor asserted that it should be paid extra costs that exceeded the project funding authorization. It asserted that representations by the government should estop it from being able to rely on the statutory defense that the funding was not authorized. The Third Circuit concluded that the doctrine of equitable estoppel may be asserted against governmental entities in Pennsylvania. However, in applying the doctrine to the case before it, the Third Circuit found that the contractor seeking compensation from the governmental entity had failed to meet the elements of an estoppel claim. Therefore, it reversed the District Court which had granted the claim and vacated an award in excess of $1 million.
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Thank you for a very well written analysis of one of the pitfalls of government projects; we have had clients in similar positions as Wayne Moving and it seems to fall very near the end of the project when construction delay penalties threaten our client. We concur that payment concerns must be made in wrtiting as well as an expression of the difficulty in choosing between continuing with the additional work or stopping work pending authorization of the addition costs.