Southwestern Engineering Company, Cross-Appellant v. Cajun Electric Power Cooperative, Inc., Cross-Appellee
915 F.2d 972 | Court of Appeals for the Fifth Circuit | 1990
What This Case Means for Subcontractors
Southwestern Engineering contracted with Cajun Electric to design and manufacture power plant components. Cajun suspended and then terminated the contracts for convenience. The court ruled that Southwestern could recover unabsorbed overhead costs (the cost of idle facilities and staff during the suspension) through an equitable adjustment clause, but could not recover the full contract price since the termination clause limited recovery to actual costs incurred. This means contractors can get paid for overhead losses during suspensions if they prove the work stoppage idled their resources.
Key Takeaways
- •Document all overhead costs during suspension periods—staff salaries, facility costs, equipment maintenance—to support an equitable adjustment claim for unabsorbed overhead.
- •Termination-for-convenience clauses that cap recovery to 'actual costs incurred' will not allow you to recover the full contract profit, even if the owner terminates without cause.
- •Include equitable adjustment language in your contract that explicitly covers unabsorbed overhead caused by owner-directed suspensions or delays, and define what costs qualify.
Unabsorbed overhead is properly includable in equitable adjustment if contractor proves changes idled facilities.
Frequently Asked Question
Can I recover overhead costs if the owner suspends my work and then terminates the contract?
Yes, you can recover unabsorbed overhead costs (idle staff, facilities, equipment) if your contract has an equitable adjustment clause and you prove the suspension idled your resources. However, if the termination clause limits recovery to 'actual costs incurred,' you cannot recover lost profit or the full contract price—only the direct costs you spent.
Related Cases
Texas Natural Resource Conservation Commission v. IT-Davy
Sovereign immunity bars a contractor's breach-of-contract suit against a state agency absent express legislative consent; neither the agency's conduct, contract terms, nor general statutes waive immunity from suit.
Martin K. Eby Construction Company, Inc. v. Dallas Area Rapid Transit
A contractor must exhaust administrative remedies established by a regional transportation authority before pursuing breach of contract claims in court, even when the authority lacks governmental immunity from suit.
Edwin P. Harrison, and United States of America, Party in Interest v. Westinghouse Savannah River Company
The Fourth Circuit reversed the district court's dismissal, holding that the False Claims Act broadly reaches false statements made to obtain government contract approval, not just false payment claims themselves.
General Services Commission v. Little-Tex Insulation Co.
The State does not waive sovereign immunity from breach-of-contract suits by accepting contract benefits; Chapter 2260's administrative procedure is the exclusive remedy for such claims.
Green International, Inc. v. Solis
No-damages-for-delay clauses in construction contracts need not meet the conspicuousness requirement established in Dresser for exculpatory negligence clauses, and such clauses are enforceable to bar delay damages absent specific exceptions.
Flameout Design & Fabrication, Inc. v. Pennzoil Caspian Corp.
Summary judgment for defendants was properly granted because Flameout failed to satisfy the statute of frauds for an alleged three-year contract, as the three documents cited did not constitute a signed, enforceable written agreement for the sale of goods.