Arbitrator awards Gratech $1.7 million settlement

By Marvin Baker

A breach of contract filed against McKenzie County, has brought a Berthold construction company a nearly $1.7 million award after an arbitrator confirmed the contract was breached.

A 12-mile grading and paving project on McKenzie County Road 12 near Keene, delayed Gratech past its deadline date despite having a contingency of extension.

“When it became apparent to us the slow relocation of utilities, such as fiber-optic cables, power poles, water and crude oil pipelines, made timely completion of the work doubtful, we requested the time extension in early June 2016 which the county engineer quickly denied,” Harley Neshem, of Gratech said. “We then gave notice of a claim for constructive acceleration due to delays caused by utility conflicts and presented our damages claim in February 2017.”

A hearing was held in late March, and the arbitrator’s decision was final on May 29. Olson Construction Law of St. Paul, Minn., represented Gratech in its case against McKenzie County.

“The arbitrator’s decision is a huge victory for Gratech and other contractors working throughout North Dakota,” Thomas Olson of the law firm said. “It sends the message that public owners must work with contractors when they encounter unforeseen utility delays and not simply demand the contractor figure it out.”

He added, “We hope this decision will not only result in improved utility coordination efforts on future construction projects, but also remind contractors they can and should stand up to owners and engineers who disregard the contractual rights of those performing the work.”

As Neshem described it, McKenzie County 12 wasn’t ready for construction in the first place.

“We did hear the oil companies were pressuring McKenzie County to make the improvements,” Neshem said. “That may be the reason for awarding a contract without having the right of way cleared of utilities although the county engineer tried to argue this was normal construction.”

McKenzie County road engineer Suhail Kanwar didn’t respond to requests for comment.

In total, the project was worth $20 million and Gratech was able to meet the original Nov. 1, 2016 deadline, however, Neshem said the company was working seven days a week to meet said deadline.

“Although the contract provided that Gratech was entitled to additional contract time for the utility delays, the county engineer denied Gratech’s request,” Olson said. “As a result, Gratech was forced to bring additional labor and equipment to the project, both of which significantly increased the cost of its work.”

At the arbitration, McKenzie County attempted to avoid liability by claiming, among other defenses, that Gratech was the cause of any project delays, that Gratech failed to meet certain procedural requirements and that Gratech should have planned for the utility delays, according to Olson.

“The arbitrator, however, ruled that Gratech proved the existence of an excusable delay as a result of utility conflicts, provided timely notice of its claim and experienced damages as a result of the county’s failure to grant additional contract time,” Olson said. “The arbitrator’s decision on the county’s liability is final and binding, and Gratech intends to pursue enforcement of the award in North Dakota.”

The arbitration results of this case titled “Gratech Company, LLC v. McKenzie County, North Dakota, would have set a legal precedent had it been a formal court decision, but arbitration doesn’t make the law.

Source: Baker, Marvin. “Arbitrator awards Gratech $1.7 million settlement.” The Kenmare News, 13 June 2018, p. 7.