Maintenance Enterprises LLC (MEI), a subcontractor that helped build the Iowa Fertilizer Co. (IFCo) plant in Wever, Iowa, was awarded approximately $62.4 million by a jury on Oct. 12. The case was brought against the general contractor, Orascom E&C USA Inc. (OEC), in U.S. District Court for the Southern District of Iowa, Davenport Division, in February 2016 (GM Feb. 26, 2016).
OEC is a unit of Orascom Construction, Cairo, Egypt. IFCo, which is not a part of the lawsuit, is owned by OCI NV, Amsterdam. The $3 billion IFCo facility was officially inaugurated in April 2017 (GM April 21, 2017). At the time, anticipated capacities were 195,000 mt/y of sellable anhydrous ammonia, 420,000 mt/y of urea, 1.5 million mt/y of UAN, and 315,000 mt/y of DEF (GM Nov. 23, 2016), though the company more recently said production has exceeded capacity.
The jury found that OEC breached its contract with MEI by not paying its invoices, and awarded MEI $50.1 million plus interest. It added on other sums, including OEC’s use of MEI’s tools and consumables, punitive damages, and diminution of value damages.
MEI said on Dec. 22, 2015, it warned OEC that it would halt work until OEC paid overdue invoices. Thereafter, MEI said it was told to prepare to hand over its work to OEC, and the last work the subcontractor performed was on Jan. 31, 2016. MEI said it was owed some $53 million at the time.
MEI, which is owned by MEI Group, a unit of Crown Enterprise LLC, all of White Castle, La., said it was initially hired in September 2014 to work on the ammonia primary reformer furnace, and was retained to work on the urea unit in first-quarter 2015 after another subcontractor was terminated.
OEC countersued MEI, saying it was owed over $65 million due to MEI’s poor performance on the project (GM May 6, 2016). OEC said MEI agreed to an $85 million contract to complete a downstream scope project before Sept. 15, 2015. However, the cost and timeline kept going up, with the cost at $140 million as of December 2015 and the completion near June 2016.
OEC terminated its deal with MEI in December 2015, and said it hired new subcontractors who found problems with MEI’s work performance that required repairs. It said MEI-caused delays also pushed construction into the winter of 2015/2016, which weighed on costs. Overall, it accused MEI with low productivity, insufficient manpower, high turnover, and inaccurate estimates.
While the jury found MEI breached the contract with OEC by failing to comply with OEC’s specifications, drawings, and quality plans, it awarded OEC no damages. It found MEI did not breach the contract by failing to perform its work in a reasonable amount of time or by charging OEC for out-of-pocket costs that were not reimbursable under the contract.