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Hernando won't pay contractor extra millions on dredge project

BROOKSVILLE — The County Commission won't be paying millions of dollars more to the company it hired to dredge the Hernando Beach Channel and on Tuesday unanimously declared Orion Dredging Services LLC in breach of its contract.

To keep the project from simply dying, the commission then agreed to begin the search for a new contractor and seek some repayment from Orion's bonding company.

County officials planned to gather this morning to begin to plan whatever they need to do to get the long-delayed project back on track. Even as the meeting ended, they were huddled discussing what information they will need to bring back to commissioners at their next regular meeting Tuesday.

County Administrator David Hamilton told the commission that items he had planned to bring forward next week will have to wait with the dredge taking priority. The county's concern is that there is not much time to get a new contractor on site and under budget and complete the work needed to meet the state's June 30 deadline.

The commission's action will likely bring a legal response from Orion as an official with the company told the board Tuesday that Orion had its lawyers ready to go if the county declared a breach of the contract.

Orion officials had requested the hearing before the County Commission after the county notified them recently that it had breached its contract and had 10 days to get back to work. Monday was the 10th day.

Orion officials wrote back to say that work could not begin again until the county agreed to pay added costs of the modified project. The dredging firm has asked for another $7.8 million on top of its $5 million contract.

The budget for the entire project is $9 million with the state picking up two-thirds of that cost.

Abandoning the project was not an option, Lisa Hammond, purchasing and contracts consultant for the Clerk of the Circuit Court, told commissioners. That option would require the county to pay back $2.8 million to the state and would have had other implications.

The project had to be modified from its original plan in January, just weeks after dredging began, when officials discovered that the water returned to the nearby canal was loaded with sediment.

That was a violation of the provisions of the county's dredging permit from the state Department of Environmental Protection.

Working with officials from Orion and the county's dredge consultant Halcrow, county officials worked out a solution to the sediment problem acceptable to the DEP. Last month, the agency issued the county a new permit requiring the use of settling ponds and a coagulant to strip the solids from the water.

Orion officials argued Tuesday that Halcrow designed a de-watering plan that was flawed and it is Halcrow's job, and not Orion's, to design a system that works. The contract tied Orion to use the flawed system, a mechanical dewatering unit, said Orion's general counsel and vice president Peter Buchler.

He told commissioners that his firm wants to stick with the project. In order to meet the letter of the contract, the county and Orion would have to agree to a change order, a new price and a change in the schedule.

He said that the county was in essence asking Orion to do millions of extra dollars worth of work for free.

Even with settlement offers by the county, Buchler said the sides were more than a million dollars apart. But that was only part of the story, Hammond said.

The last settlement the county offered also had the county agreeing to millions of dollars in additional work on the project, including hauling treated spoils to the landfill and waiving landfill fees. Orion had also asked to be paid "stand-by'' fees for idling their work while the new permit could be obtained.

Hammond said the contract with Orion clearly stated that there would be no compensation for such down time.

The county has taken the position that Orion was hired to accomplish the dredge and had ample opportunity before bidding the project to examine the existing conditions, work out a plan that would meet the permit requirements and bid accordingly.

Todd Stockberger, senior vice president for Halcrow, argued on Tuesday that it was Orion's job as contractor to choose the methods of dewatering that would meet the requirements of the DEP permit, including requirements to properly clean the sediment from the water to be returned to the canal.

In the final analysis, Commissioner Dave Russell said it was any contractor's responsibility to do their examination of a site before setting a bid price, and Orion simply didn't do that.

The biggest thing, he said, was that Buchler told the commission that he would not guarantee for them that the new dewatering system would work either. "That pretty much does it for me,'' Russell said.

Commission Chairman John Druzbick said that Orion had violated permit conditions from the very beginning of the project and he "took offense" when Buchler indicated that the county was willing to entertain a settlement because they bore part of the responsibility. That, Druzbick said, was especially difficult to hear from someone pushing a $7.8 million change order.

"They're trying to hold us over a barrel,'' he said. "I do not have the confidence that this is the way to go.''

Barbara Behrendt can be reached at behrendt@sptimes.com or (352) 848-1434.

Hernando won't pay contractor extra millions on dredge project 09/21/10 [Last modified: Wednesday, September 22, 2010 1:57pm]

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