The contractor hired to expand a Colorado steel mill estimates delays will set the project’s completion back at least a year and that its costs will double the price of the original contract. The owner and builder now accuse each other of breach of contract in a federal lawsuit.
Palmer North America LLC signed a $302.2-million contract in May 2021 with Fargo, N.D.-based Wanzek Construction Inc. to build the long rail plant expansion of its EVRAZ Rocky Mountain Steel facility in Pueblo. Wanzek says Palmer has now terminated the contract.
In a complaint filed in U.S. District Court in Denver, Palmer accuses Wanzek of creating delays “immediately” after executing the contract. The owner said the contractor failed to submit a work schedule by a deadline, and the schedule it later provided had not been integrated with procurement and contained errors. After falling behind schedule, Wanzek repeatedly refused to prepare a recovery schedule, the lawsuit alleges.
However, Wanzek alleges in a counterclaim that Palmer was actually responsible for the delays, claiming the owner did not turn over the site by the date they had agreed on. When Wanzek finally got site access, it found the site preparation contractor had not completed work sufficiently. Wanzek removed more than 70,000 cu yd of earth from the site before it began construction.
Palmer also failed to meet the deadline to turn over design and engineering for the project, Wanzek contends. As of this month, the design had gone through numerous revisions and is still incomplete, according to the counterclaim.
The project was originally scheduled to complete in February. As of December, Wanzek says work was about 48% complete. The contractor estimates that work would not finish until February 2024, and at a greater cost. The price of its contracts with submitted change orders now is $424 million, and Wanzek estimates the total cost will exceed $600 million.
In a response to the counterclaim, Palmer reiterates its argument that Wanzek is to blame for the delays.
The owner alleges the departure of Wanzek’s construction concrete superintendent and the firing of a project controls manager led to more delays. The suit also claims several safety incidents contributed to delays. Crews hit water lines twice, in one case shutting down work for a week and in another, forcing the steel mill to halt production for a day after a subcontractor hit a cooling line. A lawyer for Wanzek denied the allegations about the various incidents in a court filing, and the company says in a statement that it denies that it failed to meet any safety or quality standards.
“Wanzek is proud of the work that we have done in constructing a world-class facility with a best-in-class safety record, as evidenced by our more than 2,000,000 work hours without a Lost Time Accident,” the company says.
Palmer seeks more than $130 million in the suit, which also targets Wanzek’s parent company, the large Coral Gables, Fla.-based contractor MasTec Inc. Wanzek says Palmer delayed and disrupted its work but is refusing to pay for increased costs. The contractor says that it presented Palmer with written notice in November demanding it stick to the terms of the contract, only for the owner to file its suit the next month.
Wanzek is concerned Palmer cannot afford to pay for the project, the contractor says in its counterclaim. Chicago-based Palmer is an LLC with sole member New CF&I Inc., which U.S. Securities and Exchange Commission records indicate is a subsidiary of EVRAZ North America Ltd. That firm is a unit of EVRAZ plc, a Russian company listed on the London Stock Exchange, but trading in its stock was temporarily suspended last year after Russia invaded Ukraine.
The U.K. government froze EVRAZ assets and placed sanctions on Roman Abramovich, the Russian billionaire who holds the largest stake in the company. The U.S. has moved to seize two aircraft owned by Abramovich, with the U.S. Dept. of Justice describing him as an “oligarch” who illegally had U.S.-made Boeing and Gulfstream planes moved to Russia after the war began. Other major shareholders of EVRAZ have also faced western sanctions.
Attorneys representing Palmer did not respond to inquiries. In a court filing, Palmer says it “provided adequate assurances” when Wanzek questioned its ability to pay for the work, but the contractor expressed concern in court records.
EVRAZ announced last August that it was looking for a buyer for its North American business.