Air Quality Control System Retrofit
$1.1-billion, Cost-Reimbursable (At Risk Fee), EPC Contract

In the wake of impending state regulations requiring significant reductions in air emissions from power generation facilities, the project owner contracted the engineering, procurement, and construction of air quality control systems at three separate power generation facilities to one EPC contractor.  The cost-reimbursable contract included all EPC activities related to the concurrent retrofit installation of Flue Gas Desulfurization Systems (scrubbers) at three separate sites.  The EPC contractor’s fee was at risk based upon the anticipated projected costs for all three facilities.

Early in the project, the EPC contractor experienced delays related to:

  • Design/Engineering
  • Fabrication
  • Permitting
  • Piling

While there was disagreement as to the cause of the delay, the parties agreed to a contract amendment which set forth a plan to recover the delay. The amendment called for the EPC contractor to be compensated to accelerate its work, recover the lost time, and achieve the completion date.

In its effort to recover the schedule, the EPC contractor worked overtime, added shifts, worked weekends and added manpower.  The EPC contractor achieved the required milestone dates and the scrubbers were in service prior to the new state regulations going into effect.  However, the owner claimed that the EPC contractor exceeded the anticipated project costs and withheld final payment of approximately $150 million.

Rhodes was engaged by counsel for the EPC contractor to review and respond to claims submitted by the owner concerning the payments withheld. The owner stated the EPC contractor incurred additional costs beyond what it deemed reasonable to complete the project on time and on budget.

Rhodes analyzed and provided an opinion as to the merits of the owner’s schedule delay analysis and the contractor’s recording of project costs. Rhodes’ analysis also included a review and assessment of the budget for the project, including the total costs incurred. Generally, Rhodes’ analysis included project issues related to:

  • Construction Delays
  • Contingency
  • Acceleration
  • Loss of Productivity
  • Reimbursable Costs

Rhodes submitted an expert report summarizing its findings and rebutting the owner’s claims.  Rhodes also provided deposition testimony regarding the opinions presented in its report in anticipation of a federal jury trial.  The parties reached a settlement agreement shortly before the scheduled trial.