1982 10 06 BAWA Minutes Attachment "A"
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® ANGLETON GENERAL MECHANICAL INC.
CONSTRUCTION CONTRACTORS
October 5 , 1982
Mr. Fritz Lanham
Baytown Area Water Authority
P . 0. Box 424
2401 Market Street
Baytown, TX 77520
Re: BAWA Transmission Line, Section A
• Gentlemen:
AGM, Incorporated bid on the above referenced project and
received a contract dated September 24 , 1979 . The BAWA
board need not be reminded that this was over three years
ago.
The contract carried a 270 calendar day completion time with
the additional stipulation that the portion of the project
between the treated water plant site and Decker Drive would
be completed within 220 calendar days . AGM would have liked
nothing better than to meet these dates . We recognize that
there has been considerable embarrasment and inconvenience
caused to all parties by the untimely completion of this pro-
ject .
AGM has made every attempt throughout the life of the pro-
ject to complete the construction on time. Notwithstanding ,
we have been accused on numerous occasions of being the cause
of the late completion of this project . Indeed , we have had
our share of problems and have at times been guilty of bad
judgement and less than perfect performance .
However, we feel that we have been the victims of numerous
problems which we have had to overcome throughout this pro-
ject . These problems have been the direct cause of our un-
timely completion and have been the cause of a cost overrun
of more than $1 . 6 Million.
A thorough presentation of these problems will require a
good deal of research and expense to AGM. At this juncture,
we are inclined to walk away from any possible claims against
the BAWA board and to accept these losses as the consequence
of a bad job . However , in order for us to accept this course,
we must require that the board also walk away from any claims
that it may feel it has against AGM.
5616 ROYALTON
HOUSTON,TEXAS 77081
713/665-•226
•
Mr . Fritz Lanham
October 5, 1982
Page 2
We recognize that this is not an easy course for either AGM
or BAWA. BAWA has been subjected to a good deal of pressure
from the media and from the Project Engineer , to believe that
AGM is the only guilty party in the BAWA pipeline delays .
AGM is under pressure from its owners and accountants to re-
cover its losses . The simple fact is that this is not an
easy proposition for either party.
However, prior to making any firm commitments with regard
to positions it may take, we urge BAWA to consider the fol-
lowing list of problems which AGM is prepared to prove if
called upon to do so in defense of its position against
• BAWA:
1 . Delays on the Thompson Road portion of the pipeline en-
compassed more than 275 days with several concurrent
delays preventing completion of 3 major areas until well
past AGM' s completion date. Preliminary research in-
dicates that even with some welding problems which AGM
would have had to overcome, this portion could easily
have been completed by the required date . The Engineer
was untimely in its processing of changes and neglected
to actively pursue solutions to problems . The Engineer
also abused its discretion as an agent of the owner to-
ward inspection of the project . This , and not any
problems caused by AGM, caused the project to go on line
many months later than planned .
2. Along Lynchburg/Cedar Bayou Road, AGM made good progress
only by skipping those portions of the pipeline where
problems necessitated an engineering decision. Thus ,
although apparent progress was made, many costly hours
of completion work were required to make the final tie-
ins after receipt of change orders for the revised work.
Substantial completion of the balance of the project
from Thompson Road to Station 279+40 was not achieved
until September 1981 . Timely resolution of problems by
The Engineer along the way could have allowed the pro-
ject to complete much earlier . The Engineer took a head-
in-the-sand approach and took the position that the pro-
blems were "all AGM' s". This position may have, in The
Engineer ' s opinion, been serving to protect The Engineer
from liability in resolution of the problemq . However,
it had the very negative effect on the project of making
problem resolution very untimely and , in fact , compounded
the delays .
•
Mr . Fritz Lanham
October 5, 1982
Page 3
3 . Project records indicate that many months passed between
AGM' s initial request for assistance in solving a problem
and the ultimate resolution of the problem by issuing a
change order. The Engineer ' s reluctance to commit to
any finite decisions on problems left AGM' s crews with
little initiative to pursue the work in a highly pro-
ductive manner . Each time the crew would begin work, a
problem would arise causing the crew to stop work await-
ing a decision. Numerous defects in the contract draw-
ings resulted in a substantial number of conflicts along
the Thompson Road portion of the line. The mere fact
of an unusually large number of conflicts would have re-
sulted in substantial cost overruns . Coupling the large•
number of conflicts with The Engineer ' s reluctance to
make any commitments as to problem resolutions , however ,
resulted in devastating financial consequences to AGM.
No less than eight major unscheduled crew moves were
made by AGM' s crews as a result of the delays caused by
these unresolved changes .
4. Another major problem deals with extra cost and delays
encountered as a result of The Engineer ' s inspection
practices on the pipeline. The Engineer made no interior
inspections of the pipeline until after the entire
Thompson Road section of pipe was installed and ready
to be pressure tested . Although many inspection trips
were apparently made by The Engineer ' s inspector and a
jobsite representative was on the project daily, no
formal inspection procedures were established until very
late in the project . The Engineer ' s inspector acted
arbitrarily , rejecting large amounts of the interior
grouting as unsatisfactory . AGM' s crews spent many months
attempting to meet some arbitrary criteria established by
The Engineer. AGM was finally forced , on several occa-
sions , to hire an outside inspector to check the work and
to establish acceptable, industry standard , grouting
procedures . The Engineer ' s inspection practices are
totally inconsistent with engineering practice or with
industry standards in regard to installation of this
type of pipe. AGM expended exhorbitant sums of money
attempting to comply with the unusual inspection practices
on this project .
5. The next problem concerns the actions of Harris County in
regard to the unreasonable cleanup and finishing requests
made of AGM throughout the project . During the life of
the project , weather conditions were less than ideal for
construction. Harris County ' s inspector made it a prac-
tice of soliciting complaints from residents whenever the
•
Mr . Fritz Lanham
October 5, 1982
Page 4
work was not left in a spotless and final finish con-
dition. Because of the nature of the soil materials
encountered on this project , and the weather conditions
during the life of the project , it was virtually imposs-
ible to keep the project spotlessly clean at all times .
Thus , AGM proceeded with construction with the attempt
to cleanup the roadway shoulders and ditches whenever
weather would permit . On most projects this procedure
is entirely satisfactory . However , when the county
inspector is soliciting complaints from the residents
and threatening shutdowns (and , in fact , seeking police
injunctions to do so) , it is difficult , if not imposs-
ible,• for a contractor to keep the spirit of his pro-
ductive efforts high and to achieve cost effective work.
AGM' s contract was not with Harris County . However,
BAWA took a hands-off attitude where work with Harris
County was concerned . The result was that AGM got no
relief from any of Harris County ' s unusual requirements .
AGM expended large sums of money in attempting to meet
Harris County ' s unreasonable demands . On a normal pro-
ject, cleanup would be required only twice : first , a
rough cleanup when the pipe was installed ; second , a
final cleanup at project completion.
6. AGM was under a constant financial hardship on this pro-
ject due to several arbitrary and unusual practises by
The Engineer . First , The Engineer had a preconstruction
meeting with AGM wherein The Engineer was advised of
AGM' s intention of starting construction at the treat-
ment plant site. Due to the many street bores on this
project, it was necessary to have a consistent plan and
stick with it .
Also , due to the large cost of pipe materials , it was
necessary to install pipe as soon as it was delivered
to the jobsite. Immediately, AGM had materials for an
area in which The Engineer knew, but said nothing , of
problems which caused AGM to be unable to work. Thus ,
AGM had a large investment in materials and financial
difficulty making payment to its pipe supplier . AGM
was always behind on cash flow due to this problem.
Further, The Engineer made arbitrary deductions from
pay estimates for "uncompleted work" . Even though the
contract carried both a Performance Bond and a Retainage
of 10%, this arbitrary deduction was made . These re-
ductions of money due AGM further compounded a difficult
financial situation.
•
Mr. Fritz Lanham
October 5, 1982
Page 5
7 . Unresolved changes still represents over $50 , 000 in
outstanding sums due AGM. The Engineer has arbitrarily
and without good reason rejected major costs incurred
by AGM. In the interest of settling these matters , AGM
has drastically reduced the extra cost requests . How-
ever, The Engineer has failed to provide adequate jus-
tification for rejecting the requests . These changes
remain to be settled.
8. At today ' s interest rates , the interest alone on the
extra cost expended by AGM for this project is over
$200 , 000. This , together with the withholding of sums
• due AGM, and the extra costs encountered by AGM which
have not been previously included in change orders , has
caused AGM to finance, at great expense , a substantial
portion of BAWA' s project. This cost , too , is rightly
to be considered in any settlement matters .
AGM has incurred additional costs far and above what any
contractor would have normally expected to be incurred on a
project of this nature. Should the BAWA board decide on a
course of action other than full payment of the contract
amounts due AGM, then we shall have no other recourse than
to pursue these matters to their full extent .
We trust that the BAWA board will concur with the position
that an equitable settlement of this projcet is most appro-
priate and will vote to release the monies due AGM, Incor-
porated.
Sincerely,
AGM, Incorporated �/�
71 __ C. �'7 c -e
Theodore C . McGill
President
•