Source: http://archive.azcentral.com, April 2, 2013
by: Ryan Randazzo
Contractors have filed more than $16 million in disputed claims against the Spanish company that is using a $1.45 billion federal loan to build a massive solar power plant near Gila Bend.
At least eight contractors have been involved in disputes with Abengoa Solar over the Solana Generating Station and have filed construction liens, a legal tool to collect on bills.
The bulk of the claims have been filed by Interstate Mechanical Corp. and Kitchell Contractors Inc., two Arizona companies who say Abengoa has owed them between about $13 million and $16 million since last summer. Several other Arizona companies have filed liens claiming they were not paid for a total of $437,000. Some have settled privately.
“It has been harder and harder to deal with them,” said Kitchell President Jim Swanson, whose company has been contracted for about $70 million in work at the plant, most of which has been paid.
The construction of the solar plant has included about 400 contractors and about 1,600 construction jobs since work began in 2010.
Abengoa’s affiliates include Abeinsa EPC, Teyma USA and Abener. Kitchell won a large contract from some of these affiliates last year and hired Interstate Mechanical as a subcontractor.
Because Kitchell has not been paid, its subcontractors also have not been paid, which is typical for such transactions. That prompted Interstate Mechanical, or IMCOR, to file notices of claims against Kitchell last month totaling $16 million.
Kitchell had to file its own claims against Abengoa, though it claims about $3 million less than IMCOR is owed. The companies are likely to enter binding arbitration on the dispute as the project aims for completion this summer, Swanson said.
In the meantime, Kitchell has fronted nearly $1 million to its subcontractors, an unusual practice, to keep them working as it waits for payment from Abengoa, he said.
Bob Karber, an attorney representing IMCOR, said that while his client had to file its claim against Kitchell, the two companies are working together to get paid by Abengoa.
“Not only has IMCOR had to meet payroll, it also had to pay suppliers and contractors for work performed on the job,” he said. “It would be an understatement to say the lack of payment is causing a significant financial burden on IMCOR.”
IMCOR pulled all its employees off the job in January as a result of nonpayment, he said.
Abengoa officials in Arizona and Spain did not respond to multiple requests for comment on the conflicts. A New York public relations firm, speaking on behalf of Abengoa, provided a statement.
“In a project as big as Solana, there is always a chance that incidents arise and lead to situations such as this or there are some sort of disputes,” it said. “Abengoa always acts thoroughly in accordance with the law and is working towards their resolution.”
Construction companies may file a lien on private property in Arizona where they have worked or provided materials and not been paid.
Liens are a legal tool that prevents any additional lending to the property without the lien filer being satisfied. If unresolved after six months, the party filing a lien can file a foreclosure action on the property, though that rarely is the result.
The public relations firm speaking for Abengoa, Weber Shandwick, said that the project is on track and some of the smaller liens have been settled.
“The rapid resolution of these liens demonstrates that Abeinsa EPC … is committed to fairly compensating contractors for their work on the project,” it said. “Abeinsa EPC continues to look forward to timely completion of the project in partnership with the Arizona contracting community.”
Massive project
The power plant has been a boon to contractors who struggled to find work during the recession. About 1,500 construction jobs were created as Abengoa began covering three square miles of former farmland west of Gila Bend with large mirrors and other infrastructure.
Solana will be the largest power plant of its type in the world when it opens, though a similar, larger one is under construction in California.
“When this thing happened, we were really, really excited to get involved with these guys,” Swanson said.
The project got a federal loan from the Stimulus Act in 2010. Abengoa officials said at the time they were investing another $550 million into the $2 billion project.
Department of Energy officials said they were aware of the construction disputes taking place at the Solana project, but they declined to comment for this story.
The goal of the Stimulus Act was to create jobs, and in the case of Solana, to help develop a fledgling industry.
But contractors began running into problems getting paid, and some of the disputes threatened to close small businesses,
Swanson said that Abengoa changed its plans many times on the project.
For some of the piping work, which Kitchell now is trying to get paid for, Abengoa subsidiaries provided 970 documents and drawings as guidelines. But after work had begun, the company added 530 additional documents, and revised about 40 percent of the originals, he said.
“This thing was in design after they asked us to start building it,” he said.
Multiple disputes
Officials from Kitchell, IMCOR and other companies involved in the disputes said the number of liens on the solar project show Abengoa’s poor project management and willingness to pinch contractors to gain a higher profit.
Cave’s Canopies and Steel Inc. in Apache Junction filed a $6,980 lien on the Solana property in February. The company did $17,500 worth of work building railings and other facilities at the plant, president Darrel Cave said.
With some of his invoices more than six months old, he was forced to file a lien, he said.
“We performed the work and have not been funded,” he said. “This is a big, multinational company using federal funds, and they just bury you with red tape. We filed our lien and all of the sudden the lawyers for the other party come out and browbeat you.”
Cave’s lien is just one on a long list of smaller claims against Abengoa.
Safway Services of Tempe filed a $423,000 lien in February. This company was a subcontractor to IMCOR.
Precision Steel Erectors filed a $292,000 lien in December, which has been settled.
Hertz Equipment Rental Corp. of Black Canyon City filed a $75,600 lien in January 2012, and it has been settled.
Skyline Steel Inc. of Gilbert filed a $42,000 lien in July, which has been settled.
Thermafiber Inc. of Indiana filed a $20,666 lien in February, and still is dealing with the company.
Thermafiber was a subcontractor to a subcontractor, according to the lien. Company officials declined a request for comments on this story, as did many of the contractors who have settled with Abengoa’s affiliates and and released their liens.
Marty Grant, whose document company, Executive Lien and Contractor Services Inc. in Lake Havasu City, helps contractors file liens, said the disputes are common for big projects.
“That’s how these big guys operate,” she said. “They come in over budget, then go back and don’t pay all their contractors and fight over invoices.”
The disputes make it difficult for subcontractors.
“That last little bit of money (that gets disputed) is usually your profit,” she said. “Nobody will do anything because … you take whatever you can get. These people with deep pockets can do that. They have lawyers on staff and can do it to everybody.”
Kitchell still has workers finishing up other contracts at Solana, but Swanson said his company will not work with Abengoa again.
“The way Kitchell does business, this is not very common for us at all,” Swanson said. “We go a very long way to avoid these situations. It is not good for anybody.”