CH2M found in default of $136M TX highway contract after project delays

Dive Brief:

The Central Texas Regional Mobility Authority, frustrated with delays, notified contractor CH2M that it considers the company in default of its $136 million contract to add a toll lane to each side of an 11.2-mile piece of Austin, TX highway, according to the Austin American-Statesman. Authority officials said the project is three months past the original completion date.
Officials said CH2M has 60 days to cure the default by submitting a detailed project completion schedule and putting additional workers on the project, according to the American-Statesman. If CH2M does not comply, the authority could force the company off the project. Alternatively, authority officials said, CH2M’s bonding company could pay the authority to complete the project with another contractor. Authority officials said any solution might result in additional delays.
CH2M had no comment as to the authority’s notice of default, but the American-Statesman noted that in previous letters to the authority, CH2M blamed the slow progress on harder-than-expected limestone during boring, labor shortages, a larger-than-anticipated number of abandoned utility lines and pipes beneath the surface, and red tape in relocating a water main.

Dive Insight:

Mike Heiligenstein, the authority’s executive director, told the American-Statesman that CH2M’s manpower has dropped from 384 workers in July to its current workforce of 200. In addition, he said, drivers have seen little activity on several miles of the project. And monthly billings have been in the $2-$3 million range in recent months when they should have been near $7 million, according to Heiligenstein.

Heiligenstein also told the American-Statesman that there is $70 million left to pay on the project, but he anticipates CH2M will have to pay out of pocket to the tune of at least $35 million to $40 million to complete it.

The problem of labor shortages, which CH2M cited as one of the reasons behind the slowdown, has been an ongoing industry concern. In a report this week, the Associated Builders and Contractors said companies of every size continue to be impacted by the skilled labor shortage.

Based in Englewood, CO, CH2M Hill is a global engineering firm that offers construction, consulting, and design services for public and private sector clients. The firm, which is employee-owned and operates an internal stock market, ranked at number 480 on the Fortune 500 list earlier this year, with 2014 revenue of $5.414 billion. In April of this year, the firm announced it was rebranding as simply CH2M to create a "refreshed brand."