Liquidated damages award rules in favor of merchant power company

Washington, D.C., November 2, 2009 — What is believed to be the U.S. construction industry’s largest-ever liquidated damages award was entered against construction giant Bechtel and in favor of New Athens Generating Company, LLC, a merchant power company.

The arbitration award – finalized two weeks ago – serves as an instructive lesson on the willingness of arbitration panels to uphold liquidated damages in contractual disputes.

In the construction industry, liquidated-damages clauses are often inserted into construction contracts, specifying specific amounts – or damages —–that will be due to the owner if the contractor does not meet its targets, such as a completion date.

The project began in 2001 when New Athens engaged Bechtel, a power plant builder, to design and build a $533 million power plant in upstate New York to be powered by Siemens 501G combustion turbine generators.

At the time of contracting and during construction, the Siemens 501G technology was brand new, requiring product modifications. When Bechtel completed the project eight months behind schedule in early 2004, it brought an arbitration proceeding against New Athens, seeking $94 million in damages it said fell within New Athens’ legal responsibility.

New Athens counterclaimed for $33 million in liquidated damages. Following three extensive trials and testimony, not only did New Athens deliver a resounding defeat to Bechtel on its affirmative claims, New Athens obtained $27 million in liquidated damages for Bechtel’s inexcusably late completion of the project. The arbitration panel ruled that Bechtel had voluntarily and knowingly assumed the risk of installing the new technology.

Previous articleElectrovaya enters the Japanese energy storage market
Next articlePennsylvania energy efficiency plans approved

No posts to display