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Bioethanol Plant Construction Schedule Delay and Design Dispute

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.

 

HMA Vogel v. Carvel - LCIA Arbitration

I. Introduction and Project Summary

Carvel (Carvel), purchased a property, which consisted of an existing citric acid crystallization plant, a lime works facility, and molasses storage facility, from Vidic Bokovina & Lipsky in October of 2003. Carvel purchased the plant to construct and operate a bioethanol plant in place of the old facilities.

On 29 September 2005, Carvel entered into a contract with HMA Vogel (HMA) to deliver and put into operation the technology for the production of bioethanol and distillery dried grain solubles (DDGS). The following graphic illustrates the bioethanol plant process.

 

Bioethanol Plant Process Diagram

Source: …

 

Carvel entered into a contract with MoldaviaRK (Moldavia) in November of 2005 to undertake the civil and structural construction at the site, which included each building’s floors, walls, roofs, equipment foundations, steel structures, and grating. Moldavia used the VP designs in order to complete construction of its civil and structural scope of work....

 

II. Summary of Dispute

II.A. Summary of HMA Claim

On 20 March 2008, HMA submitted a claim to Carvel in five (5) separate letters totaling.... The following table summarizes each of HMA’s five (5) claim letters.

 

Summary of HMA’s March 20, 2008, Claim

 

III. Summary of Observations and Conclusions

III.A. Time Period 1: Basic Design by HMA

HMA generally met the contractual milestone date for providing the basic design to Carvel by 14 December 2005, but did make revisions to the basic design in January and March 2006. The following graphic illustrates the basic design time period and the planned and as-built schedules.

 

Time Period 1: Basic Design by HMA

Source: …

 

Additionally....

III.B. Time Period 2: Basis of Civil Design by HMA

HMA was contractually required to deliver both part 1 and 2 of its Basis of Civil Design to Carvel by 3 January 2006. HMA made significant changes and/or modifications to its Basis of Civil Design on 5 April 2006, to at least 36 foundations and various structural steel items surrounding the listed equipment. The following illustration shows the areas where HMA made changes to its Basis of Civil Design that HMA acknowledged in its....

 

HMA Changes to Basis of Civil Design on 5 April 2006

 

Interface Consulting also....

III.C. Time Period 3: Detail Design by HMA – Piping Isometrics

HMA failed to meet the contractual milestone of 1 June 2006 to issue the detail design, including piping isometrics. In fact, HMA provided the last revisions of the isometric piping drawings, almost five and a half (5.5) months late. Interface Consulting has compared the timing of HMA’s submittal of the piping isometric drawings to…. This graphic shows that HMA did not issue the first piping isometric drawings until 16 August 2006, and did not deliver 50% of the piping isometrics until 26 October 2006.

 

HMA Revisions to Isometric Piping Drawings and Actual Installation
Total Project – All Areas

 

Further analysis indicates....

III.D. Time Period 4: Procurement and Construction

The overall delay to the construction phase of the project....

 

IV. Interface Consulting Delay Analysis

IV.A. Contractual Perspective Relative to Delay

Based on Interface Consulting’s analysis of the facts of the matter which are discussed later, it is Interface Consulting’s opinion that HMA’s failures to perform its contractual commitments delayed the project. Such delays were either solely caused by factors within the control of HMA or, to a less significant extent, concurrent with Carvel-caused delays. In reference to that conclusion, HMA was required to complete its scope of work “within the deadline given in the Contract.”

In accordance with....

IV.B. Schedule Analysis Methods

Interface Consulting has evaluated the numerous methods available to analyze the project schedule. These methods include, but are not limited to, the planned versus actual, impacted as-planned, time impact, windows analysis, and the collapsed as-built techniques. However, the lack of progress detail, planned detail, and certain as-built dates has precluded the use of many of these methods. Based on the information available, Interface Consulting chose to use the collapsed as-built schedule analysis method because....

IV.C. Interface Consulting Schedule Analysis – Collapsed As-Built Method

Interface Consulting has chosen to use a collapsed as-built schedule analysis which does not rely on detailed planned scheduling or schedules. HMA’s ever-changing planned dates in its schedule undermine the credibility of these planned schedules.

The collapsed as-built schedule analysis method utilizes the as-built schedule from the project as well as the actual delays experienced on the project. The delay periods are then input into the as-built schedule. The party responsible for the delay is also….The following planned schedule....

 

Contract Planned Schedule

 

Interface Consulting also developed an as-built schedule from numerous sources including meeting minutes, correspondence, Carvel documentation, and Mr. Cameron’s report. The following graphic provides a summary of the as-built schedule developed by Interface Consulting.

 

As-Built Schedule – Interface Consulting

 

Piping Installation Delay - Lighting

HMA has claimed that lighting of the project during construction caused productivity problems for its piping installation activities. Illumination of general areas of the project was the responsibility of Carvel, which included areas such as; walkways, stairs, roads, walls, and overhead....

Other Delays and Issues – Scaffolding

HMA used scaffolding throughout the project to give itself access to its equipment. The scaffolding was meant to be a temporary structure to allow HMA to complete its installation process....

HMA delayed Moldavia’s grating activities in SO 108 because HMA’s scaffolding in the distillation building was in the way. HMA’s scaffolding delayed Moldavia’s grating work in SO 108 from 30 March 2007 until 2 May 2007....

Other HMA Delays and Issues – Welding and Labor

The erection of the HMA-supplied fermentation tanks required a large amount of relatively complex welding to erect numerous pieces of each tank. This work was the responsibility of HMA’s subcontractor, AMS, to carry out the construction. Petro & Gas, Carvel’s construction manager, was present at the fermentation building to inspect work progress....

Electrical Supply

HMA is claiming that electrical power interruptions disrupted and delayed the commissioning efforts by HMA. Electric power supply to the plant was interrupted on several occasions and resulted in complications with the equipment and the quality of the product. The plant is connected to the local public power supply grid, and therefore, the plant was liable for any power supply interruptions that may have resulted from this system....

Water Supply

During the second trial operation, HMA claims that Carvel failed to supply enough soft water during the commissioning phase. Soft water was required as a cooling agent in the production process and was Carvel’s responsibility to supply. The soft water is primarily used in the milling stage of the process. HMA states in correspondence to Carvel that there is a higher demand for soft water during the commissioning stage than during the normal operating stage. HMA attempted to store some of the soft water for later use, but the amount of water stored by HMA was insufficient....

Corn Supply

HMA has alleged that Carvel failed to supply corn in a timely manner during the commissioning phase of the work. The supply of corn is critical in the bioethanol process because it is the commodity needed to produce bioethanol. Carvel was responsible for the supply of corn to HMA during the commissioning phase.

It does appear that the corn supply may not have been sufficient during the commissioning phase on certain days in October and November 2007. In its 12 November 2007 letter to HMA, Carvel identifies each time the corn supply issue arose, the cause, and the length of time. The following table summarizes the lack of corn supply due to the following events and length of time associated with each issue.

 

Lack of Corn Supply Event Summary

 
HMA Training of Carvel Personnel

HMA and Mr. Cameron claim that Carvel’s staff was unqualified to operate the plant. One of HMA’s obligations under the contract was to train Carvel’s personnel so that they would be able to operate the plant. HMA was required to train Carvel’s personnel during the comprehensive testing stage....

 

V. Comments on Mr. Cameron's Delay Expert Report

In this section, Interface Consulting will comment on Mr. Cameron’s Delay Expert Report that he issued in relation to this arbitration.

V.A. Summary of Interface Consulting’s Comments

In his report, Mr. Cameron has chosen to use an as-planned versus as-built schedule analysis technique. Mr. Cameron has also chosen to base his analysis on only those work activities related to delivering equipment through the warranty test. Furthermore, Mr. Cameron does not address the engineering/design and procurement phases of the contract work. There were numerous delays during the engineering/design phase that impacted....

Additionally, Mr. Cameron makes the decision to use as his “baseline schedule” a schedule from March 2006, almost six (6) months after the contract work began, as the basis of his as-planned schedule. Mr. Cameron then amends....

V.B. Discussion of Mr. Cameron’s Report

 

VI. Signature

 

VII. Exhibits