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The following is an excerpt from an Interface Consulting work product issued for use in litigation, arbitration, or mediation (dispute resolution). Names, dates, and other information has been modified for client confidentiality purposes.

 

ABC Midstream, LP v. Norris Pipeline Co., Inc.

I. Introduction

ABC Midstream, LP (ABC), entered into a Master Service Agreement with Norris Pipeline Co., Inc. (Norris), on July 24, 2006. As part of the Master Service Agreement, ABC contracted with Norris to perform the land-based Petroleum Pipeline Project.

Norris achieved mechanical completion in early December 2006, and the pipeline was put into use on December 6, 2006. Norris had not fully completed the cleanup work, including repairing areas where the ditch line had sunk.The following graphic illustrates the shifted contract-planned schedule and Norris’s actual schedule.

 

Shifted Contract-Planned versus Actual Schedule

Source: …

 

Norris was unable to meet its planned progress and complete the project on November 1, 2006, in accordance with the contract. The following graphic illustrates the typical pipeline construction process.

 

Typical Overland Pipeline Construction Process


 

 

In June 2009, Victor McMann of McMann & Associates issued a report titled Evaluation of Petroleum Pipeline Project. The following passage illustrates the main issues addressed in Mr. McMann’s report.

Norris incurred additional expenses as a result in delivery of pipe, late release of right-of-way (ROW) and lack of access to the ROW. Norris incurred an additional $1,357,333 to complete the work due to these impacts.

The composition of Mr. McMann’s damage calculation is as follows...


II. Summary of Observations and Conclusions

General Observations and Conclusions:

Norris failed to address its various issues in accordance with its contract with ABC. The damages associated with Norris’s issues are without contractual support and project documentation substantiation. Norris’s claims are without support by both the contract and the factual project record. In addition, Norris has provided no foundation for its alleged damages.

Norris’s position is further compromised by....

Late Commencement of Construction:

Norris entered into the contract with the knowledge that it could not start ROW work until August 9, 2006, at the earliest. It appears from the records we have seen that Norris began construction activities on August 11, 2006. Additionally....

Right-of-Way Availability:

Norris maintains that its progress was impeded due to a lack of available ROW during construction. The first 10 miles (approximate) of ROW was released prior to Norris beginning construction activities, and the remainder of the ROW was released prior to Norris’s front-end crews completing this first 10 miles. Mr. Brad Womack, Norris’s superintendent in the field during construction, testified in his deposition that he was not aware of any time in which construction was delayed due to ABC’s failure to obtain available ROW, as shown in the following excerpt....

Interface Consulting has reviewed the daily reports....

Interface Consulting has not identified any other delays in the contemporaneous documentation attributable to a lack of ROW. Therefore, Norris’s claim is not supported by the project documentation other than the isolated incident addressed above.

ABC Pipe Material:

Norris has alleged that ABC failed to provide the pipe material to Norris in a manner that did not impede Norris’s ability to progress its work. The project documents that we have analyzed do not support Norris’s position. As shown in the following graphic, Norris’s stringing crew was for the most part right behind its clearing and grading crew.

 

Norris’s Clear and Grade and Pipe Stringing Progress

Source: Norris Daily Reports…

 

From the illustration above, it appears that Norris’s stringing crew was progressing down the ROW in close alignment with and usually behind the progress of its clear and grade crew. In fact....

Right-of-Way Access:

Norris claims that ABC failed to provide access to the ROW in various locations and along the 5-foot space between FM 530 and the ROW. ABC provided alignment sheets and other project information to Norris during the bid stage that indicated certain work site access points, and those work site access points were available to Norris during the construction phase.

Norris’s allegation that it incurred damages based on the lack of access to the ROW is not supported by the contract, Norris’s bid, or project documentation.

Adverse Weather Conditions:

The contract addresses inclement weather, and Norris accepted the risk of delays due to inclement weather. Norris’s owner, Mr. Jacob Norris, confirms this in his deposition testimony as shown in the following excerpt....

Interface Consulting has reviewed the weather data for the area throughout the project duration. The following graphic illustrates the rain events that occurred during the contract duration as well as the extended project duration from November 1, 2006, through early December 2006.

 

Project Precipitation Data1

Only one (1) significant rain event....

Norris’s Productivity Loss:

From the project documents we have examined and deposition testimony that we have reviewed, it is Interface Consulting’s conclusion that Norris failed to achieve its planned productivity due to its own failures, including mechanical failures, estimating and planning deficiencies, and environmental-related issues. Norris and Mr. McMann have failed to show that ABC caused the productivity losses that Norris experienced on thisproject. In addition, we have observed that certain issues within Norris’s control such as equipment operations, manpower loading, and planning appear to have had a detrimental effect on Norris’s labor productivity and work progress.

Additionally, Norris’s ditching crew experienced numerous equipment breakdowns, as shown in the following graphic, which did not allow it to keep pace with the welding crew. The ditching crew’s progress was not impaired by the welding crew’s production as indicated by the distance between the welding and ditching crews.

 

Norris-Caused Delays to the Work

Source: Norris's Foreman's Daily Reports and Inspector's Daily Reports

 

Quantification of Damages:

Norris bases its damages on a simple formula, which is known in the construction industry as the “total cost” approach. To use this type of damage model, we consider that Norris needs to meet the following criteria before a total cost claim can be considered appropriate as a damage model:

  1. The nature of Norris’s cost increases are impossible or it is highly impractical to determine segregated cost for specific issues

  2. Norris’s bid/estimate is accurate

  3. The actual costs incurred by Norris are reasonable

  4. Norris is not responsible for any additional costs

Norris’s reliance on a total cost approach is not supported by industry standards and is also undermined by the following facts and conclusions....

Additionally, Norris’s costs were inaccurate and cannot be relied upon in a total cost damage model or as the basis of damages. The following illustration is from Norris’s cost records and reflects that Norris’s costs are not accurate....

Norris’s cost report....

Lastly, Norris has failed to account for its own issues that occurred on the project and is requesting reimbursement from ABC for those additional costs by using the total cost method. Norris was responsible for certain additional costs caused by equipment failures, personnel problems, poor project management, etc. The following graphic illustrates a number of the equipment breakdowns and other delays and disruptions that Norris experienced on the project that appear to be Norris’s responsibility and which should have increased Norris’s cost of performing its work. The graphic that follows is only a portion of….

 

Norris Issues

 

Source: Norris Foreman Daily Reports and Inspector Daily Reports

 

Norris has clearly failed to meet the criteria recognized in the industry to allow Norris to use a total cost method for establishing its damages, even if Norris had valid claims, which it does not.

Analysis of Victor McMann’s Report

Interface Consulting will provide its comments on specific conclusions in the report Mr. McMann submitted....

 

III. Discussion of Observations and Conclusions

III.A. Analysis of Norris’s Claims

In this section we will discuss Norris’s claims….

Late Commencement of Construction

Right-of-Way Availability

Right-of-Way Access

Adverse Weather Conditions

Norris’s Productivity Loss

Norris’s Alleged Damages - Contract Entitlement

III.B. Analysis of McMann’s Report

 

In this section we will respond to McMann’s report….

 

McMann’s Damage Model

 

IV. Conclusion

In conclusion....

 
 

V. Signature