A company that worked on the $302 million project to expand the city’s HPOWER waste-to-energy facility by installing a third boiler has sued the project’s general contractor, claiming it is owed nearly $12.6 million for additional work done because of more than 100 change orders that nearly doubled the amount of its contract.
The lawsuit suggests that the project was rushed, which led to "an incomplete design" and a "continual flood of changes during construction."
American Electric Co.’s suit against Parsons RCI Inc., the general contractor for the project, was filed in U.S. District Court in Honolulu on Monday.
Neither the city nor Covanta Energy Co., which operates HPOWER for the city, are party to the lawsuit.
However, city spokesman Jesse Broder Van Dyke confirmed that the city is a party to a separate lawsuit filed by Bering Sea Environmental LLC, which did insulation work on the project, claiming that it is also owed money by Parsons for work it had done. At least one other company subcontracted on the project reached a settlement with various parties, sources said.
Taxpayers could wind up paying for added costs if the companies seeking the extra payments win their suits and Covanta and Parsons choose to recoup the money from the city, although Broder Van Dyke said Friday that there are no claims for additional payment against the city by either Covanta or Parsons.
Former Mayor Mufi Hannemann announced in January 2008 that the city was to begin negotiations with Covanta to design and build the third boiler. City officials at the time said the expansion was allowed under Covanta’s existing contract to operate the facility.
Parsons was hired by Covanta in December 2009 as general contractor for the project, which increased by 900 tons a day HPOWER’s capacity to convert household waste to energy that is sold to Hawaiian Electric Co. City officials estimated it would be able to take up to 80 percent of the island’s solid waste.
American Electric was the subcontractor for Parsons tasked with providing electrical installation work, the lawsuit said.
In its suit, American Electric alleges that its contract amount was $12.87 million and, while it has been paid most of that money, is owed $12.58 million more due to "changed and extra work" it was forced to do based on more than 100 requested changes.
The change orders were requested as late as March 6, 2013, the lawsuit said. The project was dedicated on Oct. 9, 2012.
American Electric "was required by (Parsons) to perform extra work which was outside of its original scope of work, accelerate its work, re-sequence its work, perform re-work due to uncoordinated and deficient drawings, with the promise and agreement that (American Electric) would be compensated for its extra work," the lawsuit said.
The lawsuit said Covanta had promised to provide a full and final design of the boiler building by November 2010 but did not do so until May 2012.
"Instead of granting a time extension consistent with the magnitude of its untimely design completion, Covanta instead directed the project to continue forward," the lawsuit said. American Electric "was therefore forced to move forward with its procurement and construction for the boiler building without Covanta’s final drawings."
Other examples were given in the lawsuit.
The lawsuit said that in June 2011, American Electric was asked to accelerate its work on the expansion’s turbine building with additional manpower because steel was delivered late. About the same time, the company was also directed to work overtime to rework switchgear that had been installed incorrectly by others and to accelerate work on a cooling tower.
By May 2012, the lawsuit said, American Electric was devoting 49 to 92 percent of its time on change order work "directly resulting from the defective and late drawings issued on the project."
American Electric chairman Bob Dewitz told the Star-Advertiser: "Covanta had a contractual obligation to the city to get the plant operational by late 2012. To meet this deadline, Covanta ‘rushed’ the project and bids were sought and construction undertaken before plans were complete. As a result, the final scope of the job was significantly more than indicated in initial bid documents. The job was fraught with problems because the design was substantially late and Covanta’s engineers were pushing drawings to the field that had not been fully and properly vetted and, consequently, contained numerous errors, omissions and conflicts."
Neither Covanta nor the city are named in the suit because American Electric’s contract was with Parsons, Dewitz said.
Amber Thompson, of Parsons’ corporate communications office on the mainland, said in an email that the company does not comment on pending litigation. Covanta corporate officials could not be reached for comment.
Broder Van Dyke said the city also would not comment on the lawsuit specifically.
However, in response to questions, Broder Van Dyke confirmed that "changes are still being worked on" at the third boiler. Covanta asked for 15 change orders to its contract, which amounted to $4.6 million and "additional change orders are in the works," he said.
That money came out of a $20.4 million contingency fund, he said. It was not clear if that $20.4 million was part of the $302.76 million total cost or in addition.
He gave no specifics on what work still needs to be done.
Asked if the third boiler is operating at 100 percent efficiency presently, Broder Van Dyke said: "As with most newly constructed complex systems of this nature, there have been unexpected glitches which the city and Covanta are working through. Overall, the third boiler is running as expected pursuant to the contract."
At maximum daily capacity, HPOWER is now expected to process 2,900 tons a day and sell 73 megawatts to HECO. The plant has processed up to 3,000 tons on peak days and 2,000 tons on average days, selling up to 73 megawatts on peak days and an average of 45 megawatts a day, said city spokesman Jay Parasco.
"HPOWER is at about 75 percent to 80 percent capacity right now," Parasco said. "The expansion was sized to accommodate future growth in waste," as well as projected increases in population.
"We expect it to be operating at full capacity in five to six years," he said.
City Council Budget Chairwoman Ann Kobayashi was among the main opponents of a third boiler, arguing that the waste-to-energy model is based on 25-year-old technology that leaves a residue that still must be placed in the landfill.
Covanta’s HPOWER contract is among the Department of Environmental Services contracts being scrutinized by the city Auditor’s Office under a resolution introduced by Kobayashi and approved by the Council in June 2012.
"With the new technology, there is no ash," Kobayashi said. "I felt that we should proceed with our goal to close the landfill, and we can’t do that if we continue to use the same technology which generates all that ash."
Where and how Oahu’s solid waste is to be disposed have long been sources of divisiveness both at Honolulu Hale and among the public, and HPOWER has been a key part of that discussion.
West Oahu residents have mounted vigorous legal challenges to shut down Waimanalo Gulch Sanitary Landfill, the only facility on the island that can legally accept consumer solid waste.
Hannemann’s decision in January 2008 to proceed with HPOWER’s third boiler set aside discussion at that time to look into building a completely separate facility based on different technology. Hannemann said a third boiler would save the city at least $100 million while reducing the urgency to find a new landfill.
The state Land Use Commission in 2009 ordered the city to begin identifying alternative landfill sites and to stop accepting municipal solid waste and take in only ash at Waimanalo Gulch by July 2012.
But that decision was reversed by the Hawaii Supreme Court in May 2012 and the matter was sent back to the city Planning Commission for further clarification. The commission has yet to take action.
Meanwhile, the city had begun the process of looking at alternatives sites for a new landfill. Parasco said Friday that currently, technical and engineering studies are being conducted for 11 possible sites.
