State ferry: 'No way we'll pay'

Alaska denies builder's request for additional $46 million

Posted: Tuesday, February 15, 2000

The bill came in too late and it's not valid, anyway.

That's the gist of a state response to a shipbuilder's claim that Alaska owes it another $46 million for the state ferry Kennicott.

Halter Marine of Gulfport, Miss., filed a claim in April that the state had the company build a much more expensive ship than the $77 million vessel Halter thought it was agreeing to build.

Halter said the state owes it $23 million for ``contractual overreaching'' and ``continuous changes'' on the Kennicott, plus another $23 million for money lost building some 15 other ships because of the Kennicott.

The state of Alaska's contracting officer's authorized representative, the state employee who was assigned to oversee the project, issued a decision recently that Halter's claim is invalid.

Halter plans to appeal that decision, said Marcus Slater, a Washington, D.C.-based attorney for the company.

Gerald Egan, the state's representative, said the 1995 contract required the company to ``immediately inform'' him of ``any act or occurrence, which may form the basis of a claim . . . for additional compensation.''

This was not done, he said. In fact, on June 24, 1998, at the last meeting before the ship was delivered to the state, ``Halter affirmatively advised . . . it did not have any claims and that it was against company policy to submit claims.''

Then in October 1998, the company said it was submitting a claim, which was presented in December and revised again in April 1999.

Slater, the attorney for the company, said he did not want to discuss specific issues in the decision, other than to say the company will appeal.

Among other reasons for rejecting the claim, Egan said some of

the extra costs Halter experienced were its own fault. The company did not staff up enough to complete the design in the four-month period it indicated it would, and ``major personnel problems'' plagued the project throughout, he said.

Some of Halter's claims are so misleading as to rise to the level of fraud under state law, he said.

Egan also disputed Halter's claim that the state knew the company bid too low for the job and didn't disclose information it had that would have changed the company's bid.

``AMHS had fully informed the offerers of the project scope of work,'' Egan wrote in late January.

However, George Capacci, general manager for the Alaska Marine Highway System, acknowledged in an interview that the state had estimated the ship would cost more than $80 million.

``It's worth more than 80 (million) . . . but that's what they agreed to build it for,'' he said today.

While Halter claims the state owes it money, the state's contention is that Halter owes it money.

Egan said while about $24,442 worth of Halter's claims for change orders are valid, the state is entitled to $1.2 million because of late delivery and because the ship weighs more than it was supposed to.

The state is seeking proposals now on $1 million to $2.5 million worth of warranty and maintenance work on the Kennicott, which went into service the summer of 1998.

Capacci said about 25 percent of that work is maintenance and the rest is warranty work. That amount of work is not unusual on a ship that size, he said. It includes such items as some heating and ventilation work and interior bulkhead painting.

``There's nothing seriously wrong with the ship,'' Capacci said. ``They're extremely complex pieces of equipment, so there's always something to do in there, but it doesn't mean it's unsafe or unseaworthy.''

The state withheld a percentage of its payment to Halter, and that will cover the costs of the warranty work, he said.

Halter also put up a bond that should cover costs such as excess weight and late delivery, said Doug Gardner, an assistant attorney general for the state.

The decision by Egan can now be appealed to Bob Doll, the director of the Southeast Region office of the state Department of Transportation. The next step in the appeal process would be to the DOT commissioner, then to state Superior Court.

A disputes review board, which is only an advisory board, is also reviewing the claim.

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