Gas Processing Plant - Extreme Climate Construction Dispute Leaves One Party in the Cold

Arbitration, North America

As a publicly traded chemical company an Owner was required to report its progress on an expansion project to its stockholders. When costs and schedule were reported to be significantly overrun and delayed, stockholders filed a securities class action lawsuit alleging that misrepresentation resulted in a decline in market capitalization. Baker & O'Brien investigated project management and execution, including progress measurement to assess whether the contractors' progress reporting was reasonably aligned with the Owner's contemporaneous reports to its stockholders.

Construction projects in severe climates and/or remote locations require specific project management and planning expertise, as unexpected problems in such locations can magnify schedule and cost consequences. Owners and contractors must fully understand and make concerted efforts to plan for these potential contingencies. Schedules for engineering and procurement must be realistic so drawings and materials are not delivered too late, possibly missing tight weather windows for construction. Manpower and logistics must be well planned to ensure that the necessary on-site skilled labor and equipment are present when prefabricated assemblies require installation.

Baker & O'Brien was engaged to assist with a dispute concerning a greenfield gas processing plant located in a remote and extreme climate location. The owner engaged an engineering firm to design a modular plant consisting of large prefabricated process modules which, when assembled together, constituted a large portion of the entire plant's equipment and piping. Separately, the owner hired a contractor to construct the plant on site. The owner was responsible for procurement by providing to the contractor all materials, equipment, and modules to the contractor.

The project suffered a late start and was completed behind schedule and over budget, leading to a dispute between the owner and the contractor. Baker & O'Brien was engaged to offer expert opinions on: (1) the project personnel capabilities and preparation for working in an extreme climate; and (2) the quality of the fabrication and construction work in relation to standard of care obligations and normal industry practice.

In performing the assignment, we assessed: (1) the mitigation plans to recover from a late start; (2) the reasons for field modifications, rework and repairs, and their consequences; (3) the logistics plans of both owner and contractor and to assess the reasons behind shortages of supplies and equipment during construction; (4) site incentives and living conditions; and (5) labor productivity. Our findings were presented to the arbitration tribunal in an expert report and oral testimony.

Tim D. Rooney


Natural Gas and NGLs
Engineering, Procurement, and Construction (EPC) / Standard of Care / Expert Witness Testimony / Arbitration / Water/Marine / Litigation
North America