Stalled traffic: Parkway project’s meltdown left local companies waiting for cash and left residents waiting for path
by Laura Camper
May 27, 2012 | 7095 views |  0 comments | 11 11 recommendations | email to a friend | print
An aerial view from April shows the point to which Veterans Parkway work has been taken, on account of delays in construction process. (Anniston Star photo by Trent Penny)
An aerial view from April shows the point to which Veterans Parkway work has been taken, on account of delays in construction process. (Anniston Star photo by Trent Penny)
Craig Miller, president of DeArmanville-based Miller Industries, was excited when his company was chosen to work on the Veterans Memorial Parkway project in 2009.

The project wasn’t just a job to him. It was in his backyard and it could mean progress for the whole county, Miller said.

“We were just excited to be part of that, of something that’s going to again revitalize the north end in the Anniston area, the potential for growth again, especially the McClellan area,” Miller said.

Miller’s company hauled dirt for the project, the final leg of the parkway that will eventually connect Interstate 20 with U.S. 431 and Alabama 21 north of downtown Anniston.

The highly anticipated parkway was approved by Congress in 1998. The first leg from I-20 to Greenbrier Dear Road opened in 2003. But funding for the last section to U.S. 431 was slow in coming.

The American Recovery and Reinvestment Act of 2009, commonly known as stimulus funding, may have saved the project. The money, which was supposed to preserve jobs in an economy that was bleeding them, was to be used for projects that were shovel-ready and Anniston’s leg of the parkway was. Congress appropriated $47 million toward the project; many thought this meant some local economic development would finally be kick-started.

L&T Construction, based in Hernando, Miss., was the low bidder at $29 million for the grading and bridge work for the road. Construction began Oct. 28, 2009. The estimated completion date was May 13, 2011. After that, all that would be left was paving. An overpass slowly took shape over Alabama 21, connecting the parkway’s future end with U.S. 431.

Enormous earth-moving equipment slowly carved a roadbed out of the McClellan hillsides. Motorists on busy Alabama 21 could watch the progress being made and imagine their journey to eastern Oxford or to Interstate 20 being shorter in the near future.

But then, the trucks stopped. So did the checks to L&T’s subcontractors and suppliers like Miller. By this January, the Alabama Department of Transportation had dismissed L&T from the project, and just when the path through McClellan would be finally paved was a question no one could answer.

Hidden problems

The portion of Veterans Memorial Parkway from Greenbrier Dear Road to Iron Mountain Road in McClellan opened to much fanfare. Local officials and the Alabama Department of Transportation cut a ribbon Jan. 19, 2011, letting through the first line of cars that had been idling and waiting on Henry Road to make that first drive onto the parkway and into the heart of McClellan.

But just around a nearby hillside, things weren’t actually going as well as they seemed, according to ALDOT records. In February 2011, subcontractors including Miller started making formal complaints about non-payment. ALDOT has a record of 10 subcontractor complaints and four supplier complaints beginning on Feb. 21, 2011.

In January 2012, the department terminated L&T Construction from the project.

L&T president Dan Cordell said he couldn’t remember every bill, but said some of the unpaid bills were due to disputes and not necessarily with the subcontractor or vendor. For instance, L&T ended up paying Miller more than the company received from ALDOT for the work he did, Cordell said.

“We couldn’t make the state understand that, sent them several letters reflecting that along with our payment of it,” Cordell said.

Some of the other bills from July, October and November were related to a forced shutdown of the project, Cordell said. ALDOT closed down the project for about three months after an Alabama Department of Environmental Management inspection found runoff violations and cited ALDOT. Cordell’s company kept working through the shutdown to correct the problems cited by the department, but not on the road.

“I’m sure we didn’t have any money coming in,” Cordell said.

Miller filed two complaints with the department — the February complaint and one on July 7. A third complaint was settled by the bonding company after ALDOT declared L&T Construction in default on the project in January 2012, Miller said.

Miller’s first complaint shows L&T was more than four months behind in paying Miller Industries and owed the company more than $40,000. Miller said that complaint was satisfied by the company, as was a complaint he filed in July.

After the first two complaints, Miller said his company left the project but L&T asked him to come back. In a conference call with ALDOT and representatives of the construction company, he was able to hammer out new terms for the agreement.

“After we changed our terms they didn’t pay us properly,” Miller said.

Miller again threatened to file a complaint, but he received a check from the bonding company satisfying the debt before he did, he said. He hadn’t been aware of it at the time, but ALDOT had declared L&T in default of its contract because it was working too slowly and removed the company from the job, Miller said.

L&T was declared in default on Jan. 17, 2012, because, according to ALDOT, the company was not making sufficient progress. By that time, according to ALDOT documents, L&T had used up 120 percent of the contracted time and completed 83 percent of the work. L&T has disputed the default, saying the delays were brought on by design problems in the project.

Cordell said as far as he knew all the bills prior to L&T’s termination on the job have been taken care of.

“If there are any outstanding issues, I don’t know of any other than a few with vendors after the default that we’re trying to work through with the surety on,” Cordell said.

More than a little behind

Any unpaid bills after L&T was terminated would have gone directly to the bonding company, Cordell said. Bonding or surety companies provide a kind of insurance for big construction projects. They guarantee that the work will be completed by the contractor.

Fidelity and Deposit Company of Maryland is L&T’s bonding company for the Veterans Memorial Parkway project.

A spokesman for Fidelity and Depost, Steve McKay, declined to comment on the company’s experience with L&T or the frequency of subcontractor non-payment complaints.

Lynn Schubert, president of the Surety and Fidelity Association of America, said it is not uncommon for bonding companies to have to pick up subcontractor payments or even payroll during projects, especially during a tough economy. But it doesn’t mean the bonding company won’t be reimbursed.

There are several reasons a contractor might not pay subcontractors, Schubert said. On the one hand if the subcontractor hasn’t done the work properly or the general contractor has had to put money into correcting things that other contractors have done wrong, the subcontractor might not get paid and the general contractor shouldn’t pay, she said.

On the other hand, if all the work is being done properly, the payments also may not get made because of financial difficulties, Schubert said. Possibly the owner doesn’t pay soon enough.

“General contractors are not normally well capitalized, so they have to get the payment from the owner to pay the subcontractors,” Schubert said.

So slower payment to the general contractor can mean slower payment to the subcontractors.

Phil Webb, whose company Webb Concrete provided ready-mix concrete for the Veterans Memorial Parkway project, said that during nearly the entire project, L&T Construction was slow to pay bills.

Webb said payments had come from the company slowly, but, he added, that’s not uncommon on government projects.

“They can run sometimes a little bit behind,” Webb said. “Not usually very lengthy, a few days or a few weeks. This time it was longer.”

L&T ran about 60 days behind on paying its bills, Webb said. However, up until his company’s final invoice, which Webb said was sizeable, L&T had always paid.

Webb also filed a complaint, but it is not listed in ALDOT’s records. He worked with the bonding company to recoup his money and recently received it.

Schubert said that could be one of the complications of the bad economy.

One way contractors have been able to make the payments on time in the past has been through lines of credit, Schubert said. But in this recession, credit has been severely limited. That’s squeezed contractors waiting for payment who need to pay their subcontractors and payroll, she said.

That’s why most projects require two separate bonds, a payment bond and a performance bond, said Schubert.

Payment bonds guarantee that subcontractors and vendors are paid during a project. They’re necessary to keep a project running smoothly, Schubert said. Meanwhile, bonding companies have the right to be reimbursed for those payments. Performance bonds guarantee that projects will be completed.

If a contractor defaults on a job, its bonding company takes over and makes sure that project is finished.

“The important thing to recognize is the surety guarantees whatever the contractor is supposed to do,” Schubert said. “So if the contractor is not liable, then the surety is not supposed to step in.”

If the surety pays, that can be held against the contractor, so if the contractor is not at fault, the surety should not pay, she said. If a surety company has stepped in on a project, that means they are satisfied that the contractor is at fault, Schubert said.

No track record

Miller said in his experience the situation with L&T Construction on the Veterans Memorial Parkway job was unusual. He’s been in business for 25 years, he said, and has never before had to file a claim on a project still in progress. Miller said he has been involved in three projects in which the contractor defaulted and he had to file a claim with the bonding company after the company’s removal.

Miller has done large projects before with many companies, he said. Many of those companies he’s worked with often, Miller said. This was his first time working with L&T.

“Most of the time we deal with people that are local, within our state,” Miller said.

This was the first time L&T, based in Mississippi, had done work for ALDOT, according to Tony Harris, a spokesman for the state department. L&T was the low bidder on the project, but had no history with the department, he said.

By comparison, a company known as Wright Brothers Construction submitted a bid just $400,000 more than L&T’s $29,374,688.44 and Wright Brothers has done a lot of work in the state, Harris said.

In order to work with ALDOT, a company has to go through a prequalification process. The process starts with a 24-page form which asks for things like a financial statement created by a certified public accountant within the last 16 months, documentation that the company is in compliance with the workers compensation law, an inventory of equipment including the year of manufacture, names of surety companies and creditors, projects completed in the last three years and the names and experience of each of the principal individuals in the company.

Harris said he believes the prequalification process is adequate and default of a contractor on an existing project is rare.

L&T is currently working on another project in Miller County, Ark. L&T started the Veteran’s Memorial Parkway project in October 2009. The Arkansas project was begun in January 2010. L&T is behind schedule on the Arkansas project, said Mike Sebren, Arkansas state construction engineer. The company is now being charged liquidated damages for not finishing the project on time, Sebren said. He said he was not sure of the reason for the delays. L&T’s surety company on that project has had to pay some of the subcontractors and vendors in Arkansas, Sebren added.

Sebren said issues like this do pop up occasionally on construction projects.

“It’s not that common, but it’s not an uncommon thing either,” Sebren said. “Typically the contractors are able to pay their bills, pay their subcontractors and pay material suppliers, but we have experienced some in the past where the bonding company has had to come in and help prop up the contractor.”

Still waiting

As difficult as the late payments were to deal with, Miller said he is disappointed to see work temporarily stopped on the project. He knows how important the project is to all of Calhoun County.

“It’s almost like progress stopping,” Miller said.

Since January, work has been at a standstill on the project. ALDOT hired Mississippi-based Yates Construction to finish the project, and expected work to resume at the beginning of April. DeJarvis Leonard, engineer for ALDOT’s Fourth Division, said work has begun.

“The contractor is on site doing cleanup work preparing for major operations,” Leonard said.

Those major operations should start in two weeks or so.

Yates advertised for bids from subcontractors, but neither Webb nor Miller — who both submitted bids — have heard whether they will be working on the project again.

Efforts to reach representatives of Yates Construction over the last two weeks were unsuccessful.

L&T has protested its termination from the project and has filed a claim against ALDOT, Cordell said.

“But we’re trying to handle that on their end and we’ve filed a claim on the job,” Cordell said. “We’ll know how it works out very soon.”

Star staff writer Laura Camper: 256-235-3545.

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