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May 10, 1972

ARMOUR AND COMPANY, a corporation, Plaintiff,
R. Stewart SCOTT et al., Defendants

Weis, District Judge.

The opinion of the court was delivered by: WEIS


 The plaintiff and defendants entered into a contract on August 21, 1967 for the design and construction of a meat processing plant to be located in the City of Pittsburgh. Unlike most building agreements which require the preparation of all plans, drawings, and designs in advance, this was what is called in the trade a "design and build" contract. Its purpose is to allow construction to start while the final drawings and details are being prepared so that work on the detailed engineering plans can proceed during the time that preliminary construction is underway.

 In theory, this type of arrangement should permit the work to move more rapidly and result in completed construction at an earlier date. It is obvious, however, that since many details have not been agreed upon by the parties before work begins, that opportunities for error, delay and expensive changes are increased over those not infrequent instances which might be expected in the normal construction contracts.

 The defendant partnership had erected a substantial cold storage plant not far from the site of the new projected meat plant, but its construction business was essentially small -- almost a one man operation, with John Nard as the active partner in charge. The remaining partners had other interests, including cold storage warehousing, as well as real estate activities, particularly in construction and leasing of shopping centers.

 One of the conditions of the August, 1967 contract was that the defendant, as general contractor, would provide performance as well as labor and material bonds. The Urban Redevelopment Authority of Pittsburgh, which had provided the land, had required the furnishing of these bonds but they had not yet been procured by the defendant by November of 1967. The parties thereupon amended the contract to allow the defendant to proceed by virtue of an arrangement whereby the retainage of the contractor would be increased from 5 to 15 percent and the plaintiff, as owner, would agree to act as surety to the Urban Redevelopment Authority.

 Furthermore, the planned completion date had already been seriously compromised although it perhaps was not recognized as such by the parties at that time.

 Nard's plan of progress was to lay out the general shell of the building, then commence work in the compressor-mechancial room where the refrigeration equipment and the boilers for the plant would be placed. After that area was substantially complete, he intended to move into the main processing area of the plant installing refrigeration piping and the necessary electrical wiring to power the many machines which would be located there.

 A key factor in this plan was the assumption that the refrigeration design would be agreed upon at a very early date in the construction so that such things as the number of compressors and the size of the piping would be fixed. This was necessary so that the more than several miles of pipe could be ordered without delay and placed in position above the projected suspended ceiling which was to be installed at a later date.

 If the refrigeration work could not begin at the time planned, revision of the overall strategy would have to be made with expensive and inefficient redeployment of subcontractors, together with the storage problems of large amounts of pipe in areas where craftsmen had to work.

 The design and build agreement had incorporated in it numerous drawings prepared by Armour which were more complete than generally obtains in contracts of this nature but were not yet so detailed as to be considered suitable for construction use.

 Discussions about the cooling requirement of the refrigeration system had been proceeding for more than a year before the contract and, at least according to one of the refrigeration experts, the loads and main design characteristics had been substantially agreed upon before August 21, 1967. However, the day following the signing of the contract, a meeting was held at which time Armour representatives decided that extensive changes would have to be made in the refrigeration plans. During the course of a series of conferences, the capacity required escalated from approximately 550 tons to the figure which was finally required in the completed building of about 800 tons.

 A refrigeration expert testified that had no substantial changes been made by Armour, the work on the design could have been completed within a few weeks of the contract signing date. However, it was not until February 2, 1968, almost six months later, that final approval was secured from Armour and the design drawings for the refrigeration phase began.

 Another source of delay was the fact that the preliminary drawings prepared by Armour set out dimensions of a room inadequate to house the boilers which had been specified and consequently that area had to be enlarged during construction.

 A key factor in the operation of this plant was the use of hundreds of specially constructed doors. These were extremely heavy, some weighing in excess of 1,000 pounds each, some being electrically operated, heavily insulated and wide enough to accommodate products being moved from one cooling area to another. Numerous changes were required before final approval was secured from Armour on the installation of these doors.

 Another very important part of the plant assembly was the electrical system. Many motors were required to be supplied to operate the processing and the refrigeration equipment, in addition to the usual electrical demands in a large modern building. At the time the contract was signed, a list of the projected types of processing equipment and some drawings were supplied to the defendant but final shop drawings for each item of ...

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