The $42 million project to install a sewer system in the city of Palmview was in danger of losing one of its contractors in recent weeks as the Agua Special Utility District — the entity in charge of the contract — threatened to terminate unless alleged deficiencies were addressed.
The relationship between Agua SUD and OG Construction was turbulent from the start as the Agua board of directors begrudgingly hired the company in May 2017, after its first choice was rejected by the Texas Water Development Board.
But emails between the two parties show that tensions between them nearly rose to the level of termination last month.
On Sept. 6, Agua SUD issued OG Construction a “notice to cure,” which notifies contractors of deficiencies that must be “cured” lest they be terminated.
The notice followed a letter from S&B Infrastructure — the engineering firm overseeing the Palmview Wastewater Project for Agua SUD — which sent a letter to OG listing alleged “deficiencies” in their completed sewer line work.
Those issues included obstacles in pipes, service tap location, deposits of extraneous materials in the pipeline, lining failures at pipe joints, broken pipes and service connection blockage.
S&B, on behalf of Agua SUD, requested that OG repair those deficiencies otherwise Agua SUD would make the corrections at OG’s expense.
Attached to the Sept. 6 notice to cure was a letter from the previous day from S&B to Agua SUD General Manager J. E. “Eddie” Saenz, in which S&B provided an evaluation of OG’s work.
S&B pointed out that OG exceeded the time allotted for the project by 203 calendar days — the contract allotted 330 days for completion, but they were granted an additional 78 days through a change order and then an additional 96 days through a second change order.
The work under the agreement expired on Feb. 13.
“As of to-date the contractor has accumulated 203 calendar days beyond contract time, resulting in an estimated cost of $406,000 in liquidated damages,” S&B wrote.
Omar Garcia, the president of OG Construction, replied to the notice to cure on Sept. 9 and began by noting that the notice was the first response by Agua regarding lack of payment to OG for its services.
But they also disputed the alleged deficiencies.
In June, a contractor, Southern Trenchless, described deficiencies found in OG’s work via televised inspection — which is done through the use of cameras — to the Agua board of directors. The board immediately agreed to hire them for further inspections.
However, OG had responded, stating that preliminary inspection was done on uncompleted work.
In its Sept. 9 response, OG stated it conducted its own inspections and asserted that none of the alleged deficiencies were present and offered video of the inspections for Agua’s review.
By mid-September, though, the parties appeared to have reached an understanding.
In a letter dated Sept. 16, OG made note of an agreement on payment and stated it would work with S&B Infrastructure on repairs to existing deficiencies.
Agua SUD then wrote on Sept. 17 that its board had agreed to hold off on terminating the company for the time being.
“The Board fully expects O.G. Construction to honor its commitment to the Project and Agua SUD as expressed in your letter sent to Agua SUD yesterday afternoon,” they wrote. “In an effort to acknowledge O.G. Construction’s expression of commitment to the Project, Agua SUD has agreed to cease withholding funds from currently pending or future pay applications for liquidated damages that have accrued or may continue to accrue.”
Though still working together, the parties appear to still be in disagreement over what inspections are required, according to an exchange between Jeffrey S. Chapman of The Chapman Law Firm — hired by Agua SUD last month — and Jonathan Almanza, an attorney representing OG Construction.
Still, in a news release issued by Agua SUD, the utility district reaffirmed it had not terminated OG Construction but “may exercise all contractual and legal rights it possess(es) to ensure the Palmview Sewer Project is completed as designed.”
“While completing the work on this long delayed Project remains important, Agua will not accept substandard work for the sake of completion,” the statement continued. “Presently, Agua has provided OG a list of items that require correction to ensure the installed work complies with the Project’s design and TCEQ regulations.”
A statement issued on behalf of OG Construction reiterated the company had worked without pay for months without a clear explanation.
“Despite this fact and other disputes related to delays and alleged deficiencies, O.G. Construction is committed to completing the project and has never ceased or reduced its work at the site even without compensation for services rendered,” the statement read.
“There is only 1.5% left of this project,” it continued. “O.G. would like the public to know that it does not intend to abandon the project regardless of these issues, as completion is days away.”