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Granite served with notice of default for stalled $173m road

Mar, 19 2012


(Oregon) -- US contractor Granite Construction has denied allegations made in a notice of default sent by Oregon Department Of Transportation (ODOT) in relation to the US 20 Pioneer Mountain to Eddyville Project.

The scheme, which has cost US$173m (£109m) to date, is being built under a design and build contract by Yaquina River Constructors, a Granite Construction joint venture. According to ODOT, work on the project has been stalled since early 2010, when it was discovered that several of the bridge columns had moved out of plumb. It said that there has been no acceptable progress on four major bridge sections and other related work since then.

ODOT has cited 26 reasons why it says that YRC is in default, accusing the design build contractor, among other things, of failing to deliver the project, performing defective work and failing to investigate the site conditions properly.

"Despite the contract amount having been substantially increased from $129,900,000 over the course of the Project, and ODOT's payment of and YRC's receipt of over $173,000,0000 to date, the Project remains materially incomplete and fundamentally defective," said ODOT.

ODOT said that the company now has 10 days to correct the default or to submit an acceptable proposal for correction.

Granite’s statement said that it is confident it is not in default of its obligations under the contract and that the allegations are without merit. It will contest the notice. "Granite has been in discussions with ODOT to address design issues and delays on the project due to unanticipated and continuing geotechnical conditions and landslide movement," it said. "Granite has been performing its duties under the contract including working with ODOT to determine how to safely and most cost-effectively complete the project. ODOT was fully aware of Granite's ongoing efforts and the company was surprised by ODOT's filing of the Notice."

According to Granite, a Dispute Review Board (DRB) concluded in October 2011 that ODOT is responsible for paying YRC for the costs of the delay and new design and construction work required to address the ongoing landslide issues. "ODOT rejected the DRB's findings and unilaterally disbanded the board," says Granite’s statement. "The DRB comprises a panel of construction industry experts with experience in assessing disputes of this nature. Both parties agreed in the contract to place a large measure of importance on the DRB recommendations."

ODOT's letter sent on 16 March says that YRC is in material default of the contract for "among other reasons" 26 points ending with "YRC has effectively abandoned the Project".

Granite president and CEO James Roberts said: "Granite Construction Company has never defaulted on a project in the history of the company. We take this Notice very seriously and intend to vigorously defend our position and reputation in this matter. Despite serious and unanticipated project difficulties, Granite remains committed to satisfying its contractual requirements on the US 20 project."

The project is aimed at creating a new, straighter 8.8km segment of US 20 between Corvallis and Newport to replace a narrow 16km segment with hairpin turns and no passing lanes.

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