CUC directs Guam contractor to stop work on oil pipeline project
The Commonwealth Utilities Corp. has directed a Guam contractor for the oil pipeline project to immediately stop work at the site for allegedly not addressing concerns raised by CUC and the U.S. Environmental Protection Agency.
CUC counsel James S. Sirok disclosed that the utilities agency is in the process of notifying Smithbridge Guam Inc. of its default in the terms of its contract, and issuing a notice of termination of the company’s contract.
In CUC’s report filed in federal court on Friday, Sirok said that EPA transmitted a letter to CUC on Aug. 1, 2014, outlining several concerns it had with Smithbridge personnel and management of the CUC pipeline project.
Because of these concerns, and in an attempt to mitigate the potential of personnel and management problems arising as the project moves forward, Sirok said that EPA gave CUC 10 days to replace inadequate and ineffective personnel on the project with competent, qualified, and experienced pipeline supervision, construction and welding personnel.
The lawyer said that CUC told Smithbridge on Aug. 4, 2014, to replace three supervisors within 10 days.
He said the company was also directed to provide with the names of their newly nominated personnel and their respective qualifications for review and approval by both CUC and EPA within 10 days.
Sirok said their written notice further outlined various CUC concerns with the project’s management and execution of planned construction work.
Sirok said they informed Smithbridge that its failure to address these concerns with corrective action would place the company in jeopardy of being declared in default.
By Aug. 14, 2014, the directives and concerns of both CUC and EPA had yet to be addressed, he said.
The lawyer said that during CUC’s discussion with Graeme Ridley of Smithbridge last Aug. 15, it became clear that the company was not prepared to address the directives and concerns.
The oil pipeline is an eight-inch aboveground receiving pipeline that delivers diesel fuel from the Mobil oil facility to CUC Power Plants 1 and 2 in Lower Base. EPA had stated that until the pipeline is properly repaired or replaced, it poses a threat to the adjacent ocean.
The pipeline project was initiated in 2010 at a cost of $1.8 million. Due to numerous problems that contributed to the project’s delay, the cost ballooned to $6 million this year.
U.S. District Court for the NMI designated judge David O. Carter will fly next month from Santa Ana, California, to Saipan to conduct another on-site inspection of the pipeline project and other CUC projects and facilities that have concerns or disputes.
Carter recently expressed “deep concerns” over the delay in the construction of the oil pipeline. He pointed out that the pipeline construction has only, at most, preliminarily started.
The federal court signed stipulated orders for CUC in 2009, setting the requirements and deadlines for the utilities agency to meet. The orders represent an agreement between the CNMI and the EPA on how CUC will come into compliance with the requirements of the Clean Air Act and the Safe Drinking Water Act.
Of course this was bonded by this company as is the usual, CORRECT?? Also this was put ut for bid. Correct??? OR was this all done under the “emergency declaration” with no bond. Could this possibly be a problem of political direction to hire “friends” in supervisory position locally for this project, or is it just the plain incompetence that was sent from Guam.
I dealt with this company years ago before they “merged” with ‘bridge’ and they from reports from other contractors were going downhill since, due to the inability to keep their good employees.
It would be good if this reporter could follow through and get more specifics.
Captain, I believe the bond is part of the selection process and final contract document…I am certain that EPA scrutinized the bid process as it involved their grant fund allocation to CUC…my only concern is why did this whole construction project allowed to ballooned to six times the original bid price and allowed to drag on…someone has to explain the justification for the delays that ultimately drove up the project cost. Incredible!
simple….CUC does not have the quality of engineers that has a good construction management ability, design review and evaluation. These things should have been caught in-house and should not rely on USEPA to comment first. It simply reflects CUC’s inability. They have a pool of engineers, but not properly trained. One common management blunder on this is micromanaging and favoritism. Who pleases whom gets the buck, typical of the higher ups. Oh I forgot, they always have a solution…hire consultants! then what’s the use of having staff of engineers. who leads?
With the technology today, you can gain knowledge and experience thru internet, right preseverance, dedication on the job, not just paycheck to paycheck attitude.
I agree – this is something that should have been caught well in advance in-house…otherwise, if the problems doesn’t appear clear at the onset, there should be plenty red flags that screams careful attention…such as meeting project deadlines, project progress submittals, inspection reports, matching progress with progress billing, and so forth…there should at least be progress meetings between contractor, owners and – or with a CM – at the very least…wow…
question….why would CUC depends on USEPA comments before reprimanding the Contractor? does this mean that CUC does not have the qualified engineers to perform review of design, evaluate proposers/bidders, do constructability reports, execute construction management. Obviously, CUC engineers are at a loss on what to expect, asks from any A&E or CM. One common blunder of any organization of having these cracks are micromanagement and favoritism. Who pleases whom gets the buck, job suffers. This may be happening upon further scrutiny, which is the root of all.
Captain…just plain incompetence from the Owner’s side.
It appears that is the case…I remember reading Patrick DlGuerrero’s concern about the pipeline project…I was skeptical on his motivation then…now, I think he is on to something…
Juan, you sound like you must work for the contractor, or have a personal grudge against someone at CUC. Reading this article, and being familiar with the quality of workmanship offered by said contractor and their competitors in Guam and CNMI, I don’t see where you get that the problem lies with CUC. Even if CUC does not have experienced staff working on their side, the facts are very clear that the contractor was hired to perform the work to a certain standard and to provide skilled labor possessing certain certifications, and that they did not. I have seen many projects that move forward to completion in both the CNMI and Guam, which appear to be successful ON THE SURFACE, but only because the agency and/or A&E “construction managers” let substandard work pass, quite often after being advised by certified inspectors that it should be rejected. I have personally been told on many occasions that the reason for this is because they do not want to look bad if the project is stalled (I guess they’re wiling to risk catastrophic failure down the road, though?)
I imagine that with the EPA and courts watching over this project, the usual poor quality of workmanship produced by our contractors is not passing muster. If that is the case, and it sure sounds like it is, I am fully supportive of EPA and CUC in holding the line and getting proper, quality work done. As you should know, based on how you talk, we pay rock-bottom prices for just about everything “skilled” out here, especially construction, and it shows – quality is lousy, and it is the safety of the public that is put at risk by this (I dread the day a significant earthquake strikes). While I am sure a big part of the cost of this project has to do with the exclusivity that a federal judge tends to give to a contractor, I am also sure that the original price was way too low, if actual federal specifications are to be used. To me, this case, while disastrous PR for CUC, is a wake-up call for all contractors, inspectors, engineers, and architects working in the CNMI: you can only blame agency staff for so long, but it is YOU who are bonded and/or insured, and blame always goes after the money, long after the politicians have grown bored looking for government scapegoats.
Potatoe, your analysis and conclusions are spot on.
Potatoe, I am neither one of you mentioned. I am not a contractor and I hold no grudge to anyone. I am just fortunate that long work experiences on both sides A&E and Construction, and extensive training in construction and business management has given me a very wide overview and know how on technical approach. Please bear in mind that I don’t mean to criticize, I am sorry if it came that way. People has to think and see things in proper perspective not just on the surface but get to the bottom of things. Please allow me to explain where I am coming from. This pipeline project was conceived because of the stipulated order. Prior to acquiring any federal grants (this is the federal SOP, on the states or here) engineers develop scope, budget estimates, timeline, etc. If the engineer is not well rounded enough to know cost estimates, loopholes begin, grant money will either be under budgeted or over, proposal or bidding prices will reveal this. If the engineer does not know or is new to the likeliness of the project, the timeline will be screwed. There are so many things that the engineers need to (aspire) to know, limitations, EIA or EIS, permitting, environmental. On this pipeline I believe it went design modification because of some site limitations, etc. THIS IS ONE SET BACK. The USEPA requirement or any requirement should be known beforehand and should be incorporated right away during the concept of design. Apparently, this was not done, MAYBE due to lack of expertise of the reviewer. I once asked during a proposal meeting, of how was the pipeline was classified. No one knows about it. I was with USEPA meeting, an engineer blurted out why not use C-900 pipe (pipe used for water) ha, ha, ha… said EPA. Once the grant money or funding is secured, project is advertised for proposal or bids. Proposal or bids submitted, an evaluation committee formed. This evaluation committee has the engineers. Engineers should do DUE DILIGENCE in the review to identify the most responsive and responsible bid or proposal. Backgounds, qualifications, etc, are checked. For sure CUC would say, they did everything and USEPA approves it. USEPA does not do scrutinees, USEPA relies on recommendation of engineers. It is only during the projects that this liabilities are coming up, whereas it could have been identified and corrected on start. I have so many encounters with these engineers, I don’t mean to criticize them but instead put focus on the management. Employees reflects the management. That’s how I was taught in several trainings and seminars. Imagine, an engineer who does not know an NP-1 sealant? an engineer who does not know what were those black polyethylene lining up the project?(erosion control measure) all these things are clearly identified on plans. It appears to me, management needs to prioritize upgrading, supporting these engineers in knowledge rather than equipping them with gadgets, and micro managing them. That is why I said “incompetence from the Owner.” Employees are what the management makes. There is so much more. Mr. Malae has this style of management, he does not micromanage, he does not put himself first, he puts his subordinates ahead of him, which should be the case. I am no fan of Mr. Malae as I have not worked with him but it reflects the employees during his time. The millions of money owed by the gov’t, in the first place, should have not come up to that amount, as I said before. It was allowed to progress to that huge amount. Why? Gov’t is not all the one to blame. If the management serves no master but the utility he serves, his reputation and professional integrity to manage things, do you think it would come up to a huge credit without disconnecting them? It’s two-fold. The gov’t and the one in cahoots, makes sense ne!
“Juan”, I once again think that you are responding with the mindset of either a contractor, or someone with a personal grudge against CUC. While you certainly seem familiar with some aspects of construction, you do not seem very savvy about contracting. It is the contractor who is on the hook for performance, not the owner. Would you blame the owner of a house for a poor job done by the contractor hired to build it for him? Of course not. Especially when the owner has also hired an expert engineer or architect to oversee the contract. While I do not work for CUC and nor am I familiar with the current personnel in charge of this project, I do know, from my industry connections, that the pipeline project is being overseen by a professional construction management firm (off island and supposedly hand-picked by EPA), as well as on-site, third party quality assurance personnel. With those additional contracts in place, no court or arbitrator in their right mind would ever see fit to blame the owner, CUC, for failure to perform by the contractor. I also know that the EPA personnel overseeing this project are not the same, well intentioned people that managed grants out here for the past couple of decades. These are enforcement people out of San Francisco, as well as DOJ prosecutors. Under those circumstances, it is highly unlikely that any of the ordinary CNMI or Guam contractors are going to be able to make the grade, I am sorry to say, and I am sure that hurts to realize. So I guess it is time to step up and pay real wages to attract certified tradespeople, or pack up and look for the easier locally-overseen work.
For Potatoe – I think you may not have any idea as to the level of competency within CUC and also its federal counterparts when it comes to contracting CUC projects. i could write a long response or comments but just be aware that CUC seems unable to understand the basic concept of risks and costs. CUC selects or operates within budgets that do not reflect the true cost of the undertaking. They have a few projects that have gone south – the fuel tanks, solar contracting, and a really nice one coming up – geothermal – drilling in a dangerous site full of protected avian species and within a residential area with no exit for residents living uphill if anything goes wrong. You seem to have much faith in CUC. Maybe you work for them. If you do, please advise why CUC is unable to control the power fluctuations. Just watch the power reading in your UPS. The fluctuations tell you that CUC power is not only unreliable, the normal power correction limits are simply non existent.
to quote someone here “Rastafar, your analysis and conclusions are spot on.”
I do not work for CUC, but I am very knowledgeable about contracting, and as I explained below, regardless of the personnel at CUC, as the “owner”, the responsibility for poor performance by the contractor is not theirs. Especially with active contracts for construction management and quality assurance.
I do not work for CUC, but I am very knowledgeable about contracting, and as I explained below, regardless of the personnel at CUC, as the “owner”, the responsibility for poor performance by the contractor is not theirs. Especially with active contracts for construction management and quality assurance.
Reread the article closely, it does seem that CUC had voiced concerned and also has issued warnings and directives to SmithBridge along with filing reports. It also shows that EPA directed CUC to take certain actions.
I am wondering just how much CUC can do on it’s own due to the fact that this project was approved by the EPA with EPA in control.
Just how tied is CUC to get these types of approvals from the EPA prior to replacing key personnel from a main contractor without EPA approval?
But I would not give a ten day deadline, I would have shut the project down until the specific persons were replaced and also assess a daily penalty against the company as the contract would allow until approved replacements were onsite..
So now the bonding company will have to take over. This is not good for this company in future contracts.
The few contractors that I have known in default on bonded contracts in the Pacific area have all ended up bankrupt. Locally Guerro Bros. on the Tinian High School project many years ago was one. That project sat idle more than ten years before completion during Juan B time..
Captain, please note the sequence. Aug. 4 CUC wrote the Contractor only after a letter from USEPA on Aug. 1. Coming to me like “why wait for USEPA letter?” In the long years that I have worked with USEPA, USEPA does not control projects, they monitor progress, comments based on reports coming from the grantee. It is always the grantee who manages and controls the project.
Like the fuel tank project, it was only during the construction progress that they came to find out that the contractor does not have a qualified welder, due to failures of test process on welded work! Why? certifications, qualifications can be caught on an early evaluation? They defaulted this contractor thru the surety bond, but why do they keep awarding contracts to the same contractor? It may be another type of project, but even then, once you defaulted one contractor they are supposedly be on the blacklist of recipients.
To add on those who have been defaulted before and got bankrupt, JC Tenorio, Western Pacific….but said company above keeps on thriving from other projects awarded by the same entity who defaulted them. Is this right? I would accept if I am wrong. Please tell me, enlighten me.