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The Honolulu City Council last week unanimously approved a $3.8 million payment to settle a lawsuit filed by a contractor tasked with making improvements at the Sand Island Wastewater Treatment Plant.
A city official said much of the disagreement over payment to Parsons RCI Inc. involved added work and delays necessitated by flood damage caused by Tropical Storm Ana in October 2014, and that taxpayers might have faced a more costly outcome had the lawsuit gone to trial.
Parsons entered into a $67.5 million contract with the city for construction work at the Sand Island plant, the state’s largest wastewater treatment facility, in June 2013, according to the company’s original complaint filed in state Circuit Court.
The lawsuit alleged a breach of contract by the city and claimed the company was owed at least $9.8 million more than the city was willing to pay.
During the course of the project, the city issued 12 change orders that added roughly $14 million to the original cost of the project, city Environmental Services Director Lori Kahikina told the Honolulu Star-Advertiser on Friday. At least $5 million was tied to the storm-induced flooding that severely damaged the basement-level electrical room, she said.
The incident caused 20 million gallons of raw sewage and rainwater to spill into the basement of the plant, disrupting operations. Water and sewage rose higher than 6 feet and submerged electrical equipment and pumps, shorting out the equipment that controls the system whereby heavy solids and lighter materials are separated from wastewater before being treated with ultraviolet radiation and piped 260 feet down into the ocean, Environmental Services officials said at the time.
About 5,000 gallons of sewage spilled into Honolulu Harbor.
The electrical room needed to be redesigned at a higher elevation. “That wasn’t part of the original work,” Kahikina said.
The electrical equipment was first installed in the 1970s, city officials said in 2014.
Kahikina said she didn’t know the specifics of other change orders.
In November 2016, Parsons requested a change order for $9.8 million “for additional time and compensation to cover extended overhead costs” due to new conditions and city-caused changes,” according to the lawsuit. The following month, the city declined to approve the change order “by asserting that Parsons used the wrong baseline schedule when calculating delays,” the lawsuit said.
According to Kahikina, the city’s position was that the company could have been doing other work when delays occurred.
The project was originally scheduled to be completed in September 2016, the lawsuit said. Kahikina said Friday the project was “substantially completed” on June 1 and is lacking only a few punch-list items. The city has actually been using segments of the improved segments as they are completed, she said.
Kahikina said including attorney fees and other costs, losing the lawsuit would have cost taxpayers roughly $12 million.
Jordon Kimura, the lead attorney representing Parsons, could not be reached for comment.
City Councilman Ron Menor, who chairs the Executive Matters and Legal Affairs Committee, said that he and his colleagues “are not pleased” the city needed to pay the settlement amount. However, “our city attorneys strongly recommended settling because the amount is far less than what the plaintiffs were seeking,” he said in a statement.
“Moreover, the city is saving a considerable amount in attorneys’ fees and costs that would have to be expended if the case were to proceed to trial,” he said. “In addition, the plaintiff-contractor has agreed not to pursue any additional claims it might have against the city in agreeing to this settlement.”
The Council in 2018 approved paying $300,000 to Honolulu law firm Kobayashi Sugita &Goda to act as special counsel for the city after the Department of Corporation Counsel concluded it needed to retain attorneys with expertise in construction law.
In January, the Council approved paying up to $500,000 more to Kobayashi Sugita after Corporation Counsel explained that mediation was unsuccessful and the case was scheduled for trial starting June 22.
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