Big River Construction – Wins Compensation Battle
When Big River Construction Inc. needed help pursuing payment for the successful completion of a complex wastewater treatment project, Schwabe had their backs the whole way.
Nothing is more frustrating than not getting paid for your work. It’s particularly stressful when the expenses are piling up—employees, subcontractors, equipment costs, etc.—and you are in the middle of one of the worst recessions in 100 years. Yet your client is reluctant to pay due to errors and delays stemming from their poor design and project management shortcomings. To add to the stress, you can’t successfully pursue new opportunities until this project is finally resolved. Big River Construction faced all this and more with a wastewater treatment plant the company was tasked to expand for the City of Tillamook. Fortunately, Big River brought Schwabe in early at the first sign of trouble and they stayed on as a partner for the long haul. In the end, Big River came out victorious.
Founded in 2001, the Astoria-based company was built on the premise that taking care of clients is the key to success. When the City of Tillamook needed to expand its wastewater treatment plant, Big River was its company of choice. The construction project began in 2007 and was originally budgeted for about $11 million. It was supposed to be substantially completed in the fall of 2008, after 14 months of construction. In addition, the contract with the City stipulated that Big River would pay liquidated damages to the City if it failed to meet the original date or an agreed-upon extended date for substantial completion. Unfortunately, the project was plagued from day one and costs eventually swelled to $17 million.
From the start, the project encountered delays as a result of design deficiencies provided by the City’s engineer and their mismanagement of the project. Just a few months into the project, Big River was forced to renegotiate for an equitable adjustment to their compensation and reset the substantial completion date to June 4, 2009. Even after this renegotiation, the City’s engineer continued to add scope and design changes, especially within the last few months of the project. Within five months of the new completion date, the City engineer issued 12 owner-directed change orders. Just for perspective, similarly complex projects typically have one or two owner-directed change orders, if any at all.
Even with the expanded scope and poor management from the City’s engineer, Big River completed 97% of the project to meet the latest substantial completion date of June 2009. The company submitted claims for the additional costs it incurred from the expanded scope and design changes.
In the fall of 2009, the City stopped making its payments to Big River, putting the company in a precarious position as it continued to work. Big River still had to pay its employees, subcontractors, equipment costs, and overhead. At this stage, the City also unfairly notified the company that liquidated damages were accruing against Big River for failing to achieve substantial completion by the agreed-upon date, although the project was 97 percent complete back in June. Moreover, Big River was denied requests for an additional equitable adjustment to the contract. These adjustments stemmed from the City’s poor management of the project, resulting in eight months of added construction, during which Big River was not paid for work it had performed. The company was owed $1.5 million.
The City of Tillamook later made claims against the company’s bond in 2011 and Big River was unable to pursue other public works projects. This action severely impacted the company’s ability to continue its operations. “There was a period of time where we couldn’t bid on public work projects at all, and we were forced into subcontractor situations,” said Mike Sarin, President of Big River.
Big River got Schwabe involved within a few months of the project’s start. Schwabe helped them administer and document the many changes and scope expansions. Once the situation deteriorated, Schwabe was able to pursue Big River’s legitimate claim against the City of Tillamook. Having early knowledge of the entire situation put Schwabe in an excellent position to argue this case when it did eventually go to court.
In 2012, Schwabe won its trial on behalf of Big River. A jury of Tillamook County residents determined that the City breached its contract and owed the company $1.5 million for work performed. The jury also rejected the City’s counterclaim for liquidated damages. The City did appeal.
During the appellate proceedings, Schwabe attorneys again successfully argued on behalf of Big River. On October 26, 2016, the Oregon Court of Appeals affirmed the lower court’s ruling from 2012 and found the City of Tillamook in breach of contract, and again denied the City’s counterclaim. The court found that Big River was owed substantial damages and it ordered the bond claim against the company to be released.
“We’re pleased with the court’s findings,” said Darien Loiselle, the Schwabe shareholder who represented Big River. “At this point, there should be no doubt—Big River Construction held up their end of the bargain and they deserve to be paid for work performed. Both a jury of area residents and the Oregon Court of Appeals have concurred that the City of Tillamook breached this contract.”
After this dispute was positively resolved, Big River has continued to thrive as one of the signature civil contractors on the Oregon coast. Schwabe was gratified to be their partner through the tough times and now is excited to help them celebrate their successes.