The latest dispute between the Yukon government and Whitehorse contractor, Norcope Enterprises Ltd., over work at the Whistle Bend subdivision has been settled out of court.
The confidential settlement over a contract dispute about sewage and piping the company installed in the first two phases of the subdivision was reached on May 15 after lengthy negotiations, assistant deputy minister of justice Tom Ullyett said at a news conference this week.
The company claims it was owed millions of dollars after changes to the design delayed the project and increased costs. The case was set for a lengthy trial this spring. The settlement means all subsurface work will be completed so Castle Rock Enterprises can begin surface work next month.
“Disputes are common. They’re common in Canada, they’re common across North America. They’re common in the European Union,” said Ullyett, noting the history of contract disputes in Canada fills a couple volumes. These disputes are best settled out of court, he said.
Contract disputes have been ongoing since 2011 when the government hired Norcope to install water and sewage infrastructure for the subdivision. The eight-phase subdivision has an estimated cost of $270 million. The neighbourhood, envisioned to house 8,000 residents, is the largest development project in Yukon. The government has spent nearly $60 million on the project so far.
Norcope’s original contract was for $15.9 million. Under the terms of this settlement, the amount of the contract has been raised to a final price of $17.6 million.
The government owed the company more than $3 million, Norcope president Doug Gonder said this week. Changes in the design for Whistle Bend forced him to use extra equipment and meant the job took four months longer to complete. The company installed more than 26 extra kilometres of piping because of changes, he said. But the project was finished on time, he added.
“It’s quite the feat that a Yukon company built this job and delivered it before the completion date with all the extras added,” he said.
“Instead of going through court and just burning wheels backwards, we decided to withdraw and just collect what we could get,” said Gonder.
According to court documents, in August 2011 the government told Norcope to stop excavation work on Casca Boulevard. But in October, the government ordered the company to finish the job. Employees worked in the cold. Lots in Phase 1 were still released on time this past fall.
But disputes continued. The government issued even more changes to the project this past August. Negotiations over the price broke down. In October, the company filed a revised statement of claim. It also claimed the government made “malicious” statements to its bonding company, claiming the company was breaching its contract, refusing to fix problems on the site and not completing work on time. This kept the company from bidding on other projects requiring a bonding company, the claim states.
In December 2012, the government filed an amended statement of claim and counterclaim. It claimed Norcope had underestimated project costs and was refusing to fix problems with water mains it installed. The government wanted the company’s suit thrown out, and for Norcope to pay for additional legal fees.
Gonder is unable to comment on exactly what those deficiencies were, he said. Some were weather-related. But everything’s been fixed now, he said.
Even if the settlement was not reached, Whistle Bend would not have been delayed, Harvey Brooks, deputy minister of community services said this week. Phase 2 lots will be released this fall. Prices have not been determined. Legal costs will be factored into the prices, but won’t raise them that much, said Brooks. Prices for unsold Phase 1 lots remain unchanged. There are 68 single family lots available, ranging in price from around $105,000 to $178,000, said Colin McDowell with the land management branch of Energy, Mines and Resources. Prices for the remaining four multi-family lots fall between just under $181,000 to $315,000.
Legal fees are part of all construction projects, said Brooks. This settlement provides clarity for scheduling and means Norcope won’t be paying any more legal fees either.
“It’s in everybody’s best interest to move this forward at this time,” said Brooks.
But larger issues need to be addressed, said Gonder. The current contract Community Services uses puts contractors in a “no-win” situation, he said. The contract requires a mediator to settle any disputes, but doesn’t put a timeline on when those disputes need to be settled, and the decisions aren’t binding, he said.
“When you’re issued a change work order by Yukon government, what happens is, you have to do that work, and if you don’t do that work, they’ll pull that contract from you,” said Gonder.
The government doesn’t spend millions of dollars fighting contracts, he said. Gonder said he’s willing to sit down with community services and discuss what can be changed.
Norcope has sued the government before over Whistle Bend. It had previously sued the government for awarding a $2 million contract to Sidhu Trucking in 2011. Shortly after Norcope first won the contract for Phases 1 and 2, the government removed a sewer lift station from the design and changed the slope of the yards. A natural sand dune – protected under original plans for Whistle Bend – had to be dug up to raise the lots.
Norcope assumed it was supposed to do this work and bought necessary equipment. But the government awarded the contract to Sidhu Trucking. In the summer of 2011, Norcope surrounded the Yukon legislature with heavy equipment in protest.
Norcope finished that job, Gonder said this week. That dispute was settled out of court before this most recent settlement was reached.
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