The city of Rapid City is headed to court in a dispute with a local construction company and a Washington-based manufacturer over the steel pipes used in a $3.7 million city water line project.
The Rapid City Council authorized city staff to file a counter suit against Highmark, Inc., of Rapid City and a third-party complaint against Northwest Pipe Company of Vancouver, Wash., following a 30-minute executive session Monday.
City Attorney Joel Landeen said Tuesday that the city hopes to have a judge decide who is financially responsible for the repairs and other costs related to defective pipe that was installed in Canyon Lake Park in 2010 as part of a project to prepare for the new Jackson Springs Water Treatment Plant.
“We had some out-of-pocket expenses, and we need to deal with the pipe in the ground,” Landeen said. “Whether it’s Highmark or Northwest Pipe, someone should compensate us for that and take care of the issues with the pipe that’s in the ground.”
Highmark was the general contractor on the project to install twin 20-inch water transmission lines from Park Drive to just past the fish hatchery on Jackson Boulevard. The steel pipes, which will connect the new water treatment plant into the city’s water distribution system, were manufactured by Northwest Pipe.
Construction began in March 2010, with an anticipated completion date of November 2010, according to city staff.
But in July of 2010, the city issued a stop work order on the project after a field test showed that the polyurethane coating on the steel pipes was not meeting the specifications for adhesion, City Engineer Dale Tech said. At that time, about 50 percent of the project was complete.
“That coating is what protects the pipe from corrosion from the exterior for decades,” Tech said.
Work did not resume until April 2011, and in the interim, the city assessed Highmark more than $306,000 in fines for missing an intermediate completion date, according to court documents.
The project was ultimately finished in early September 2011, Tech said.
Then in March of this year, Highmark sued the city in Seventh Circuit Court for breach of contract, arguing the city wrongfully withheld that $306,800 in payment after the project was delayed for reasons outside the company’s control.
“As a result of the city shutting down the project, claiming Northwest Pipe’s steel pipe was defective, it was impossible for Highmark to complete the Jackson Springs project on schedule,” the suit said. “The city agrees that the work was delayed because of conditions beyond the control and without the fault of Highmark.”
Highmark also has sued Northwest Pipe in U.S. District Court, alleging that more than 50 percent of the pipe provided to the project failed to meet the agreed upon specifications, according to court documents. That suit was filed in November 2010 and still is in the discovery phase.
Landeen said that while it is unfortunate that Highmark is caught in the middle of the issue, the city paid for pipe it believed would last 75 years.
“It’s really a Northwest Pipe issue, we believe,” Landeen said. “But Highmark was our contractor. We just need to get in the same room and try to work it out. Highmark and the city have been willing to sit down and talk about it, but Northwest Pipe has not.”
The local attorney representing Northwest Pipe said they dispute that anything was wrong with the product provided to Highmark.
“My client believes the pipe that was provided met the specifications of the contract,” said Michael Sabers of Clayborne, Loos & Sabers, a Rapid City law firm. “We’ll just allow the existing and now the new litigation to sort the issues out.”
A counter suit filed by Northwest Pipe in January 2011 claims that Highmark has refused to pay bills totaling more than $141,000 for the materials provided, not including late fees and interest, according to court documents.
The attorneys representing Highmark, Steven Beardsley and Brad Lee of Beardsley, Jensen & Von Wald of Rapid City, could not be reached for comment Tuesday.
Contact Emilie Rusch at 394-8453 or firstname.lastname@example.org.