2014's Four Most Notable Disputes, Losses and Enforcements So Far
At last year's ENR Risk & Compliance Summit in New York City I made a brief presentation on the most important disputes, losses and enforcement actions of the past year. This year's summit is Sept. 30th at Georgia Tech in Atlanta and I'm working up another short presentation based on troubles we have covered in ENR so far in 2014. Here's how it's shaping up:
Joan Rivers had a joke about elderly people who passed away and the obituaries that said something like, Sadie Goldberg, 94, of Brooklyn died suddenly July 25th. "Suddenly?" Joan proclaimed in indignant wonder. "Suddenly? You mean FINALLY!" Sometimes it's the same way when a contractor loses money on a project--there is a long interval where the wounded company survives and the end is slow in arriving but it shouldn't surprise anyone when the company finally shuts down. ENR noted that Truland Group's 'sudden' plunge was one of three recent Chapter 7, liquidation-type bankruptcies. Creditors and unpaid employees are left stranded. But there probably wasn't anything sudden in Truland's demise after its trouble on the big National Security Agency data center project in Utah. The contract payments are in arbitration but final payouts are likely to leave Truland short tens of millions of dollars.
Significance: Is it impossible to know a big contractor's true financial condition?
Would-Be Modular Construction Pioneers Turn Against One Another
Two of the best-known companies in the industry, developer Forest City Ratner Cos., and construction manager Skanska USA Buildings, teamed up to build what was planned as the world’s tallest modular tower with Forest City as developer and Skanska as guaranteed-price construction manager. Now they are feuding over delays and overruns and the shutdown of a jointly operated modular unit factory. Forest City has in public statements blamed Skanska for shutting the factory and laying off 150 workers.
Significance: Do close working relationships (the companies are partners in a factory that produces the modular units) breed more contempt when trouble breaks out?
A standoff that stopped work for several weeks until March ended with a new project completion date of December 2015. Both the Canal Authority and the contracting consortium are believed to be in arbitration in Miami over tens of millions of dollars worth of cost overruns. The dispute involved an international cast, but in some ways this was a run-of-the-mill differing site conditions case.
Significance: Cultural differences, and the involvement of the different governments represented by companies in the project, such as Spain and Brazil, probably added complications to a fairly ordinary but very large contract dispute.
How often do we get to listen to a recording of state investigators interviewing a senior regional CH2M Hill managers who reveals, hesitantly, that a key client at an expressway authority offered his company a new contract in exchange for putting friends on CH2M Hill's team? It all took place over beers and burgers at a Tampa-area golf-theme pub, Caddyshanks. State prosecutors charged the expressway authority board member and disbanded the expressway authority's board.
Significance: When your job is keeping a close relationship with a client, how do you avoid becoming entangled in criminal matters that are introduced into casual conversation?