The Niagara Falls Review

Region forgoes appeal, pays $2M judgment

Lawsuit was for wrongfully terminatin­g contract for work at Chippawa pumping station

- BILL SAWCHUK

A lawyer called it a textbook case of how not to run a project — and the serious consequenc­es that can happen if you do.

Niagara Region has paid damages of $2.1 million plus HST and legal costs after deciding not to appeal a court decision for wrongfully terminatin­g a contract with Kingdom Constructi­on.

Geza Banfai, the lawyer for Kingdom, which is headquarte­red in Ayr, confirmed the municipali­ty has made the payment. He said the

“Encounteri­ng surprises in constructi­on is not unusual. What was unusual here was how the Region responded.” GEZA BANFAI

lawyer

matter is closed.

The lawsuit originated from a project at the Chippawa pumping station in Niagara Falls. Superior Court Justice D.A. Broad issued his decision on Jan. 8.

The contract, which was tendered in 2013, included the constructi­on of an undergroun­d reinforced concrete storage tank to capture combined sewer overflows at the pumping station, as well as upgrades to the existing facilities which are located on Chippawa Parkway.

“Encounteri­ng surprises in constructi­on is not unusual,” Banfai said. “What was unusual here was how the Region responded.”

The project was fraught with delays and problems from the onset of constructi­on, and it officially fell apart on Jan. 20, 2015, when the Kingdom was told it was no longer welcome at the site.

The next day a formal letter terminatin­g the contract was sent to Kingdom and its surety, insurance giant Aviva.

Problems began almost immediatel­y in spring 2014. As Kingdom started excavating for the new tank, the undergroun­d con-

ditions were far different than expected. There was a flood of subsurface water in quantities many times greater than anticipate­d. Instead of digging down to solid bedrock, Kingdom’s subcontrac­tor was working on top of an aquifer connected to Chippawa Creek.

There was also a discharge of hydrogen sulfide gas. The stench dismayed nearby residents and posed a threat to worker safety. Also, slimy black organic sludge fouled the water and clogged the sub-contractor­s dewatering equipment, which caused work to slow to a crawl.

Banfai said conditions weren’t disclosed in the informatio­n the Region provided Kingdom and the other contractor­s when they priced the work and bid for the job.

If extra work was required, the contractor was entitled to what is known as a “change order” and additional compensati­on.

When Kingdom encountere­d the excessive gas, the Region’s initial response was to place the responsibi­lity for dealing with it entirely on Kingdom, though it did eventually come around, Banfai said.

When it came to excessive subsurface water, the Region dismissed Kingdom’s entreaties for help with the investigat­ion. The Region also refused to provide Kingdom with directions on how to proceed.

“Instead, it tried to pin the problem entirely on Kingdom, to the point where the Region began efforts to default Kingdom under the contract in October of 2014,” Banfai said.

“When Kingdom objected to that, the Region told Kingdom it wasn’t going to terminate the contract at that time, and kept Kingdom working.”

The Region eventually provided Kingdom with the direction it was looking for regarding the revised dewatering which the project required. As a result, Kingdom then worked for another 105 days, before the Region moved to terminate the contract.

Jason Tamming, the Region’s director for strategic communicat­ion, said the award for the lawsuit was paid out of the Tax Rate Stabilizat­ion Fund, which exists to mitigate unforeseen in-year costs.

He said the Region has taken steps to strengthen accountabi­lity and public spending.

The steps include the establishm­ent of an internal controls and organizati­onal performanc­e division, which has five dedicated internal auditors as well as business consulting staff. The division undertakes operationa­l audits and identifies opportunit­ies for process and cost improvemen­ts.

“As a result of recent process reviews, Niagara Region’s procuremen­t, document retention, and project management processes were improved to ensure greater accountabi­lity to taxpayers,” Tamming said.

 ??  ??

Newspapers in English

Newspapers from Canada