Contractors Must Pay For Using Foreign Steel Components, Court Rules
The Pennsylvania Supreme Court on Sept. 22 overturned a lower court ruling that had spared two contractors from paying $243,000 for work they successfully completed on a sewage treatment plant; a bill they incurred because they are alleged to have used too many components made of foreign steel on the job.
The two contractors—Bellefonte, Pa.-based G.M McCrossin Inc. and United Blower Inc., based in Ball Ground, Ga.—now must pay the contested amount.
The Pennsylvania Supreme Court found that a Commonwealth Court had wrongly calculated the amount of foreign steel in the project, when it removed penalties amounting to the cost of the two firms' work installing air blowers at the Montoursville sewage treatment plant owned by Lycoming County Water and Sewer Authority. The facility was completed in 2013.
The case has been remanded to the lower court for penalty recalculation.
The dispute between the authority and the two contractors hinged on language of the Steel Products Procurement Act. a 2013-enacted state law intended to help the U.S. steel industry by ensuring that domestic steel products are used in public projects. The law mandates that at least 75% of installed steel and steel components in a project must be U.S.-manufactured.
"We are pleased with the court's ruling. There was no clarity on the issue and this brings clarity to it," said Christine Weigle, authority executive director. [The ruling] ensures the intent of the act was met, and there's certainty regarding compliance."
The authority had argued that the blowers provided for the project, which were made of foreign steel, put the contractors below the 75% domestic threshold.
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The state high court ruling was in response to the authority’s appeal of the Commonwealth Court ruling that concurred with an earlier ruling by Lycoming County Judge David E. Grine, who overturned the agency's order that the firms repay the full cost of the blower project.
“We are disappointed that the Supreme Court, while acknowledging the lack of clarity in the Steel Act (especially as seen by the dissents and their comments) is imposing on us a set of previously unknown rules,” said United Blower attorney Paul Logan. “We believe we complied with the requirements of the Steel Act. To be fair, the ‘new rules’ should be prospective, not retrospective.”
Logan maintains that United Blower "manufactured many of the components in Georgia. What was not recognized in the decision is that the specifications actually directed us to use certain motors which were not domestic.”
He adds that "there was an approved change order directing use pf our product because the owner wanted ‘no cost equipment.’ According to Logan, "once that was approved, it became a restricted specification, but the owner later treated it differently. The Supreme Court didn’t understand, or at least didn’t consider, the effects of a written change order in government construction projects and procurements.”
He adds, "Legislators enact laws that sound good, but the practical effects are costly and cause expensive and unmanageable disputes.”
Much more clarity is needed on such laws, the attorney said. “Something needs to be done so that the construction industry knows precisely how to comply with these acts, what documentation is necessary and what is a ‘US product,’” Logan noted.
