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Public Works Construction - Airport 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.


Alpha Engineering v. Zeta Architecture Claim/Counter-Claim in Arbitration

I. Introduction

In 1995, The City of Cielo Rosado, Nevada – Cielo Rosado Airport System (CRAS) contracted with Zeta Architecture Associates (Zeta) to provide architectural and engineering services for the Modifications to the Discovery Airport Project 522 (Discovery Airport Project 522). CRAS also contracted with Star General Contractor (Star) to be its program manager. On January 29, 1998, Zeta subcontracted with Alpha Engineering Corporation (AEC), for the mechanical, electrical, and plumbing (MEP) design. AEC’s work included providing schematics, developmental designs, and construction designs, as well as assisting during the construction phase. AEC’s construction service support included assisting with design issues during construction. AEC’s contract with Zeta was a cost reimbursable contract with a maximum price.

AEC’s scope of work consisted of multiple phases of the Discovery Airport Project 522….

There were changes and delays during the design phases which extended AEC’s work. The illustration below provides an outline of the planned and actual time frames for AEC’s work scope. The illustration also shows the planned remaining work that AEC had at the time of termination in November 2003.


AEC Scope of Work Timeline


As indicated above....

AEC planned to be complete on the 522 project by April 2001. However, due to significant design changes, including changes resulting from the September 11, 2001, (hereafter 9/11) terrorist action, the design phase of the 522 project was modified and extended. After 9/11, AEC’s work continued under the premise that AEC’s services would be extended. In November 2002, AEC was informed by Zeta that substantial facility design changes evolving from 9/11 would be forthcoming. Seven (7) months later, in June 2003, AEC received the updated layouts which provided details of AEC’s revised scope of work….Zeta terminated AEC’s contract, citing two (2) articles of the contract, Article 10.5 (Termination for Cause) and 10.6 (Termination for Convenience). Zeta hired Howell Engineering Company (hereafter Howell), to complete AEC’s electrical design, and Zeta, itself, completed the mechanical and plumbing design. The following timeline illustrates the events which occurred during AEC’s contract work on the 522 project.

Timeline of 522 Project


The following table and corresponding pie chart provide details regarding AEC’s unpaid invoices....


II. Summary of Opinions

This section summarizes Interface Consulting’s opinions relative to the issues surrounding AEC’s involvement with the Discovery Airport Project 522.

  • Zeta terminated AEC’s contract for convenience. Zeta terminated AEC’s work without cause due to any AEC fault or AEC’s failure to perform. We have seen no valid reasons or substantiation....

  • Zeta breached its contract with AEC by failing to pay for work AEC performed. Zeta failed to pay AEC’s invoices....

Interface Consulting has calculated AEC’s damages using the contractual entitlement afforded AEC under Article 10 of the contract. AEC’s damages are based on the amounts....The following graphic shows the amounts AEC invoiced and the payments Zeta made from 1998 to 2003.... Zeta has failed to pay AEC $520,801 relative to AEC’s invoices for the work AEC performed.


AEC’s Invoices vs. Zeta’s Payments

  • AEC is entitled to $619,657 resulting from Zeta’s termination of AEC’s contract for convenience....

AEC’s Damages - Termination for Convenience


  • Zeta alleges three (3) main complaints regarding AEC’s performance: AEC failed to complete its work in a timely manner, AEC failed to provide adequate staffing to meet the schedule objectives, and AEC failed to provide quality work products. We have found none of Zeta’s allegations to be substantiated because....

    • If AEC’s work progress had shortcomings, it appears it could have well been due to delays or disruptions resulting from Zeta changing AEC’s scope of work or....

    • There is no indication of a lack of AEC’s capability to provide sufficient manpower to complete the project....

    • Based on the evidence provided by Zeta and the actions of the parties, it appears that Zeta’s allegations regarding AEC’s work quality are false. Zeta is referring to the early phases of the project in an effort to support its false allegations. There is no indication that AEC’s work was defective and that it led to the termination of its contract for cause.

  • Zeta interfered with AEC’s ability to complete its work. AEC’s ability to complete the 522 work was dependent on Zeta establishing....

Zeta’s constant changes and disruptions resulted in multiple adjustments and extensions to the project’s progress milestones, all adversely affecting AEC’s design completion progress. As shown in the following illustration, Zeta’s changes to 522 resulted in continuous extensions to the milestone achievement dates. The Zeta milestone achievement date extensions added years to the 522 Project due to Zeta’s work scope changes.


Zeta’s Milestone Achievement Date Extensions for 522


Zeta’s substantial extensions to the project through its numerous design modifications added almost three (3) years to AEC’s contract. Additionally....

An example of the disruption and delay to the design process involves Zeta’s addition of a baggage screening area....The following diagram illustrates the effect of a single change on the numerous systems and system components of the CRAS facility.


Zeta’s Addition of Baggage Screening Area (DC2) Required Numerous Systems and System Components to be Analyzed and Modified


As illustrated in the previous impact diagram for the baggage screening area, even one change by the architect/owner can impact many systems....

  • The contract was terminated for convenience by Zeta. Zeta is not entitled to damages from AEC without....


Interface Consulting’s Analysis of Zeta’s Damages


III. Discussion of Opinions

III.A. Zeta’s Termination of AEC’s Contract

III.B. Termination of AEC’s Contract - Damages

III.C. Zeta’s Allegations

III.D. Zeta’s Damages


IV. Conclusion

In conclusion....


IV. Signature


V. Exhibits