A Virginia subcontractor is suing Manhattan Construction Company and Federal Insurance Company over unpaid bills and extra costs totaling more than $700,000 related to a federal project in Richmond. The case highlights how payment bonds work in practice and the challenges subcontractors can face when payments stall.
The lawsuit was filed on September 3 in the US District Court for the Eastern District of Virginia by Hamilton Iron Works, Inc. (HIW). HIW had a $7.7 million subcontract with Manhattan Construction to supply and install structural steel and metals for the DLA Aviation Operations Center Phase 2 project at the Defense Supply Center in Richmond. The project was for the Department of the Army and required Manhattan Construction to provide a payment bond, with Federal Insurance Company acting as the surety.
HIW says it completed all its work properly and on time but has not received full payment. According to the subcontractor, Manhattan Construction still owes over $300,000 for work already done. On top of that, HIW claims there were many changes and delays on the project that led to additional work. The company submitted change orders to cover these extra costs, totaling over $400,000, but Manhattan has refused to approve or pay these claims.
Some of the change orders listed include minor adjustments like a $751 charge for a request for information, as well as bigger expenses such as nearly $30,000 for elevator roof changes and over $168,000 for modifications to an air handling unit platform. HIW says Manhattan directed them to do this extra work, sometimes confirming in writing they would pay for it, but never followed through.
HIW argues that Manhattan’s refusal to pay these bills violates the duty of good faith and fair dealing under Virginia law. They are suing for breach of contract, demanding at least $708,810.69 plus interest, legal fees, and costs. Additionally, HIW claims that under the Miller Act and the terms of the payment bond, Federal Insurance Company is legally responsible for the unpaid amounts.
At this stage, the lawsuit remains in the complaint phase, and both Manhattan Construction and Federal Insurance Company have yet to respond. The case’s outcome will depend on how the court addresses the claims.
This lawsuit serves as a reminder of the risks subcontractors face even on government projects with payment bonds in place. It also shows how disputes over change orders and extra costs can escalate, potentially involving surety companies. As the case moves forward, all eyes will be on how the court interprets the responsibilities tied to payment bonds and contract obligations in this kind of dispute.