SMUD and Cosumnes Contractor Face Off in Court

The Sacramento Municipal Utility District sued the construction company it hired?then fired?in February for alleged shoddy and slow construction work on its Cosumnes power plant. Fru-Con Construction, the lead builder, subsequently sued SMUD in kind. Each claims the other is guilty of breach of contract and negligence. Both seek damages for the claimed wrongs that resulted in project delays. SMUD, which filed suit in the Sacramento Superior Court at the end of February, seeks an undetermined amount in damages. Fru-Con, which sued in the U.S. District Court for the Eastern District of California last month, asks for more than $20 million in damages. SMUD also filed a claim against the surety company that signed a $108 million performance bond, which the district required Fru-Con to provide to ensure that the project is completed. ?It is possible the surety company will want to bring in a third party to finish the job or let SMUD continue to serve as general contractor and hire subcontractors,? said Steve Cohn, the district?s assistant counsel. Construction on the 500 MW project continues with subcontractors. The district hopes to have the plant operational before the summer peak of 2006, Cohn said. SMUD canned Fru-Con for alleged poor performance that stalled the completion of the nearly completed project housed near the shuttered Rancho Seco nuclear plant ( Circuit , Feb. 18, 2005). That includes supposedly ?defective? concrete in the cooling foundation and tower and allegedly faulty pipe wielding. Fru-Con submitted the lowest bid for the project and signed a deal with SMUD for $107 million in August 2003. The parties later agreed to three change orders and increased the contract amount to $108 million. In October 2004, Fru-Con demanded $25 million over the contract price for project changes and a seven-month extension. SMUD counteroffered to increase the price by $7 million and provide a three-month extension to finish the project, which was 60 percent complete. Fru-Con rejected SMUD?s counteroffer. SMUD asserts that the construction firm lowballed the project?s costs to secure the job and then tried to jack up the price, in violation of the state?s false claims act. ?Fru-Con knew it could assert maximum pressure on the District to accept Fru-Con?s demands for additional payment and additional time to complete the project,? claims SMUD?s February 28 complaint. Furthermore, according to the district, when Fru-Con agreed to a lump-sum price, it meant that it ?accepted the risk that it had properly evaluated the work necessary to complete the project.? Fru-Con countered that SMUD insisted on a laundry list of project revisions for which it largely refused to pay. Specifically, it said, SMUD was responsible for design flaws, which required the firm to submit more than one thousand requests for clarification. The public utility ?refused to execute Change Orders to compensate Fru-Con for the additional costs and time required to perform the work,? states Fru-Con?s March 24 complaint. One example cited was the adequacy of the steel supports for the roof of the electrical building. Fru-Con said it warned SMUD that the roof was weak but it took SMUD five months to realize it was ?inadequate and insufficient,? the builder asserted. SMUD then hired another contractor to fix the roof.

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SMUD and Cosumnes Contractor Face Off in Court

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