United States District Court, D. Massachusetts
ARCO INGENIEROS, S.A. de C.V., Plaintiff,
CDM INTERNATIONAL INC., Defendant.
MEMORANDUM AND ORDER
B. Saris Chief United States District Judge
Arco Ingenieros, S.A. de C.V. (“ARCO”) brings
this action against Defendant CDM International Inc.
(“CDM International”) in connection with
construction projects sponsored by the United States Agency
for International Development (“USAID”) to
rebuild schools and a health clinic in El Salvador after
Tropical Storm Ida. Pursuant to separate contracts with
USAID, CDM International assessed the sites and created
preliminary designs for the projects, while ARCO used those
preliminary designs to prepare final designs and then
reconstruct the buildings. ARCO alleges that the site
assessments and preliminary designs CDM International
produced were defective and did not fulfill the company's
obligations under its contract with USAID, causing ARCO to
incur significant costs to complete its own contractual
obligations to USAID. One of the seven claims ARCO brings
against CDM International is for breach of contract (Count
I). ARCO alleges it is a third-party beneficiary of CDM
International's promise to USAID to conduct adequate site
assessments and prepare preliminary designs for the school
and clinic projects. CDM International has moved to dismiss
Count I under Federal Rule of Civil Procedure 12(b)(6). After
hearing, the Court ALLOWS CDM
International's motion to dismiss (Docket No. 14).
following factual background comes from the complaint and
must be taken as true at this stage. See Foley v. Wells
Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014).
a Salvadoran corporation that operates out of San Salvador,
El Salvador. Founded in 1950, it is the oldest and one of the
largest construction companies currently operating in El
Salvador. It has completed major design and construction
projections for the U.S. military and public and private
entities in El Salvador.
International is a Massachusetts corporation operating out of
Boston, Massachusetts. On September 29, 2008, CDM
International entered into a master contract with USAID to
serve as the architect and engineering firm
(“A/E”) for USAID projects worldwide.
Ida Reconstruction Project
November 2009, Tropical Storm Ida hit El Salvador, causing
flooding, landslides, and the destruction of homes, roads,
bridges, schools, health clinics, and other infrastructure.
USAID provided $25 million in funding to rebuild damaged
December 8, 2011, CDM International entered into Task Order
No. AID-519-TO-12-00001 with USAID (“CDM Task
Order”), which specified its duties as the A/E for
these reconstruction projects. It required CDM International
to conduct studies and assessments of each project site and
create preliminary designs and technical specifications.
These preliminary designs had to constitute at least thirty
percent of the final designs for each facility. The CDM Task
Order also required CDM International to participate in the
procurement process for design-build contractors, who would
use the preliminary designs to create final designs and then
actually reconstruct the facilities. Finally, CDM
International had to supervise the work of the design-build
contractors. Between 2011 and 2014, CDM International made
numerous statements in public documents that it was
completing preliminary designs of at least thirty percent of
the final designs to assist the design-build contractors in
2013 and early 2014, USAID issued requests for proposals from
design-build contractors for eight schools and one health
clinic. In its solicitation documents, USAID explained that
the final designs had to be based on CDM International's
preliminary designs. ARCO only bid for these projects after
USAID encouraged it to do so. In submitting its bids, ARCO
relied on the preliminary designs and on representations by
USAID and CDM International that these designs constituted at
least thirty percent of the final designs for each project.
USAID accepted both of ARCO's bids, and USAID and ARCO
entered into contracts in late 2014 for the projects. Both
contracts included CDM International's preliminary
designs and repeated the promise that they constituted at
least thirty percent of the final designs.
Construction Problems and Delays
starting work on the projects, ARCO realized that CDM
International's preliminary designs contained numerous
defects and constituted substantially less than thirty
percent of the final designs. For example, the designs for
the schools failed to follow building-code requirements and
did not account for soil-condition and subsurface issues. The
designs for the health clinic failed to address flooding
requirements, lacked a plan for bio-infectious waste
disposal, and did not identify that the annex to the clinic
was structurally unsound. Because of these errors, ARCO spent
significant time and resources ...