Steel company names PavCo in lawsuit

More trouble for B.C. Place Stadium, where the Sept. 30 reopening was anything but smooth.

The French headquartered cable erection company hired by a Quebec steel subcontractor is suing for almost $6.5 million. B.C. Pavilion Corporation, the taxpayer-owned stadium’s operator, is named as a defendant.

Freyssinet filed a lawsuit in British Columbia Supreme Court on Oct. 31, charging Canam with breach of contract, breach of statutory trust and equitable fraud. Problems have been festering for many months. Here's my update from Aug. 4.

PCL Constructors and Canam Group were awarded a $122,864,581 contract on Nov. 18, 2009, according to the Freyssinet court filings. Canam hired Freyssinet as a subcontractor for $30,124,377, “but were unable to agree on all terms.”

"Nevertheless, Freyssinet commenced work on the improvement in July 2010 and on Aug. 23, 2010, Canam and Freyssinet signed a subcontract, backdated to Nov. 20, 2009," said the lawsuit. "However the subcontract was signed without Canam and Freyssinet agreeing on the cost of the erection work budget."

Freyssinet claims Canam failed to keep work on schedule, directed labour and equipment without Freyssinet’s knowledge or consent, interfered with Freyssinet foremen and “permitted rates from Montacier International, a company related to Canam, for labour for erection of the cable which were higher than agreed upon.”

Canam announced in November 2010 that it would “follow an alternate method of erection of the cable, without consulting with Freyssinet and without Freyssinet’s consent.”

"Through 2010, payments were made by Canam on account of the invoices, but Canam then wrongfully ceased making payment to Freyssinet."

Freyssinet says it is owed $6,466,892 by Canam, which claims Freyssinet owes it $24,137.756.44.

A Sept. 29, 2011 letter by Canam alleged: "Due to Freyssinet's negligence in preparation of the cost budget and the construction methodology, there was a significant cost overrun which Canam was required to bear in the fixed price contract with PCL."

"Canam intentionally and wrongfully made the demand to recover alleged damages for financial losses arising from the completed work. This was a wrongful, tortious act constituting equitable fraud."

As of Oct. 19, certificates of completion had not been issued for the head contract. The stadium reopened Sept. 30.

The Freyssinet claims have not been tested in court. I am waiting for responses from Canam and PavCo.

PavCo says cost overruns not its problem

What's up with B.C. Place Stadium's roof, you say?

Well, for one thing, the price.

TSX-listed Canam Group (CAM) revealed on April 21 that it would take an "after-tax reserve of $25 million" for 2011's first fiscal quarter for "additional costs for the completion of the cables" on B.C. Place Stadium's retractable roof.

"The corporation believes this reserve represents the likely loss until completion of the project, while adding that discussions to reduce the impact of the reserve are ongoing with various project participants," said a news release.

Further information is to come April 27 when Canam Group president Marc Dutil will conduct a teleconference with financial analysts and media. Spokesman Jasmin Gosselin said Dutil was not available for earlier comment on the B.C. Place overrun.

Canam's Structal Heavy Steel Construction unit announced Oct. 28, 2009 that it scored a contract worth more than $100 million from PCL Constructors Westcoast. Steel was to be sourced from St. Gedeon de Beauce, Quebec and Sunnyside, Wash. by the company that supplied steel to 53 North American stadiums and arenas, such as Air Canada Centre, the new Giants Stadium and Red Bull Arena.

"Both the deliveries and the erection work will begin in the early part of 2010 and continue until the end of the year," said the 2009 news release.

Based on that news release, the schedule has already gone overtime. The last of the 36 steel masts was not in place until Jan. 13 of this year. The original deadline was the end of December 2010. Installation of the roof fabric was supposed to begin in February, but that won't happen until May. B.C. Pavilion Corporation CEO Warren Buckley told me earlier in April that testing of the finished retractable roof would happen at the end of August or start of September with a public open house on Sept. 25. Reopening night is Sept. 30 when the B.C. Lions host the Edmonton Eskimos.

B.C. Pavilion Corporation chairman David Podmore and Buckley did not respond to email queries about Canam's $25 million overrun. Buckley was not available when I called his office Tuesday morning, but spokesman Norman Stowe said via email: "Canam’s issue has no impact on PavCo which has a fixed price contract. No one is looking to PavCo for any shortfall."

PCL inked a $318 million fixed-price contract for the roof work in November 2009. The announced cost of the taxpayer-funded renovation is $563 million (it was supposed to be $365 million).

An announcement is expected soon that the stadium will be renamed for a brand of telecommunications giant Telus. Sources say the company won the bidding for naming rights.

APRIL 27 UPDATE

Canam reported a $39.7 million first quarter loss on April 27 and blamed it on "fierce competition in some business segments as well as the provisions for B.C. Place."

Dutil said Canam's Structal division got the B.C. Place contract in spring 2009 but the final contract wasn't executed until the fall of 2009. He said Structal's scope of work included the columns, compression beams, catwalks, arches and facade elements.

On a teleconference after his company's April 27 annual general meeting, Dutil said Structal "encountered severe delays in the cable portion of the work" in the first quarter after relying on the expertise of France-based Freyssinet.

"We are not cable experts and therefore relied on a third-party to estimate, price, plan and execute the installation of the cable work required to support the fabric roof, the centre node and all the elements required for the retractable roof system," Dutil said.

"During this first quarter we encountered severe delays in the cable portion of the work and hence we estimated that a $25 million after-tax reserve was warranted at this time. We hope to be able to recover a portion of this amount. Our first priority remains to deliver a safe, quality and timely project to our customer PCL and the end-user, B.C. Pavilion Corporation... The circumstances of the B.C. Place job are very difficult, but they confirm that even in the face of such challenges we do not run away."

"We had indications that the erection portion of these cables would be a lot faster and cost a lot less than it's turned out to be. It is my understanding that the taxpayers of B.C. are not on the hook for this, this was a contract where we have to perform at a fixed-price and we'll negotiate between ourselves and third parties. No one intends to refill the bill to someone else.

Dutil said Structal is in talks with Freyssinet to resolve the matter, but his company's work will be done in late July or early August.

"It's going to be a marvel. It's going to be well-done, safe and you're going to enjoy it for many years in Vancouver. It will just cost a little more than expected -- to us."

Asked for comment on the Canam overrun, PavCo CEO Warren Buckley told me: "This is a Canam matter and has nothing to do with the delivery of the completed stadium within the scope of the fixed price contract. There is not impact on budget and we are very confident that we are on track for a Sept. 30 completion."