Republic of Palau Roadway Construction
Daewoo Engineering and Construction Co., Ltd., v. The United States of America
Cotton & Company evaluated delay and inefficiency claims on construction of a 53-mile asphalt roadway in the Republic of Palau, with an estimated cost exceeding $100 million. Daewoo presented a $64 million claim for inefficiencies, disruption, extended overhead, and projected inefficiencies from alleged defective specifications related to weather. Its claim included measured-mile methodology, as well as projected damages for future work.
Cotton & Company prepared two expert reports, assisted with litigation support, and provided deposition and trial testimony during a 13-week trial before the United States Court of Federal Claims. We identified:
- Significant unallowable costs related to inconsistent and incorrect use of equipment rates
- Inclusion of scrapped equipment in disruption claim calculations
- Inclusion of duplicate equipment in both disruption and inefficiency claim calculations
- Errors and logic flaws in the measured-mile methodology
- Use of unsupported home- and field-office overhead rates
Based on significant fraud indicators identified in our reports, the U.S. Department of Justice filed fraud counterclaims against the contractor. The Court denied Daewoo’s claim and ordered it to pay $51 million in fraud damages and penalties related to the Contract Disputes Act, False Claims Act, and Fraud Forfeiture Act.
The Court of Appeals upheld the lower court’s decision and stated:
Here the government retained Cotton & Company’s (“Cotton”) as a certified fraud examiner. Cotton determined that certain specific items in the incurred costs portion of Daewoo’s certified claim, including duplicate costs, overstated equipment costs, and overstated overhead rates, were fraudulent. The Court of Federal Claims agreed. See Daewoo Eng’g, 73 Fed. Cl. At 592,596.
Subsequent to the Supreme Court’s denial to review the appeal petition, Daewoo paid the United States Government $51 million.