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1982 10 06 BAWA Minutes Attachment "A" OR »- . ® 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 •