Officials dole out $1 million even after seeing problems with
Santa Teresa; now await testing to see who’s to blame
– and who’ll pick up the bill
Gilroy – City officials paid nearly $1 million to Granite Construction Company after learning about major problems with the contractor’s roadwork along Santa Teresa Boulevard, according to a database of city purchase orders.
With the most recent payments, the contractor responsible for widening the city’s western traffic artery has collected 98 percent of its $7.5-million contract. But city officials, who now face the prospect of having to tear up and resurface a nearly finished road, say they still have adequate bargaining power as they brace for a fight over who will pick up the bill for repairs.
“The bottom line is, we can’t arbitrarily withhold money from them,” City Administrator Jay Baksa said. “Basically, they have the right to the money. There is a dispute resolution procedure in the contract, and we can’t, nor can they, do things outside of that process. The catchall at the end is that we can withhold a percentage of their money.”
Workers with Granite Construction ceased paving Santa Teresa Boulevard in late October, after the city notified them about the formation of tire ruts in the recently paved, southbound lane. In the same letter, officials asked for a road repair plan.
Two weeks later, on Nov. 10, the city disbursed $548,897 to the contractor, followed by $431,970 on Dec. 23. The second payment came after weeks without a response from the contractor, and after city officials began speaking with attorneys in anticipation of legal action.
Baksa emphasized the city’s desire to cooperate with the company, but said the city is willing to rely on “more draconian measures” such as refusing to acknowledge the project as complete and withholding $750,000 in cash reserves. To date, the city has paid the contractor $6.6-million, or 98 percent of the project cost when excluding the reserve fund. In addition to withholding $750,000 in cash, Baksa said the city can refuse to release a bond equal to the value of the project. The bond is a legal claim on the contractor’s assets, according to Baksa, who said the city’s ability to withhold the bond would help officials bargain for repairs.
“No contractor likes to have (the bond withheld) because it affects their future ability to bond,” Baksa said.
Granite Construction, a national company that has performed dozens of multimillion-dollar jobs in California, has conducted its own “in-house testing” and believes the road meets specifications, according to construction manager Chris Sveum.
He said the company has not responded to the city’s request for a repair plan because it is awaiting test results from the city’s pavement expert.
Those results are not expected for a few more weeks, but city officials already claim that Granite Construction is responsible for “product failure.” They believe that water intrusion occurred on the western side of Santa Teresa Boulevard because the contractor chose to pave during rainy winter months. Officials said the company paved the eastern lanes – which have not shown obvious signs of deterioration – in the summer.
Asked if city inspectors are responsible for preventing such errors, Community Development Director Wendie Rooney said the “contractor is responsible for the phasing of the project.”
City officials suspect that road problems also might stem from the use of a thinner base layer beneath the asphalt, made possible by mixing lime with dirt beneath the road. The switch came at the request of the contractor and saved the city roughly $75,000. At press time, it remained unclear how much Granite Construction saved as a result of the change.
Originally scheduled for completion in December, officials now say the project to widen Santa Teresa Boulevard from two to four lanes will last at least through the summer. The project could stall indefinitely if the city and contractor head into mediation or a court battle.
“We’ll have to come up with an interim plan for the road,” Baksa said. “Hopefully that plan is short-term. And we’ll have to continue to monitor the deterioration. It’s not bad now, but it could get worse pretty fast.”
$1 Million Paid Out
City officials disbursed the following amounts to Granite Construction Company after learning in October about major problems with the contractor’s roadwork along Santa Teresa Boulevard.
– Nov. 10, 2005 $548,896.67
– Dec. 23, 2005 $431,970.37
