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1...Welch will prepare a form DNRC personnel can fill out for this
0201 - Department of Natural Resources 406 444 6699 fax 6721
020101 - Mr. Wayne Wetzel
020102 - Ms. Sarah Bond, Esquire
020103 - Department Counsel =406 444 6660; Legal Division
020104 - Mr. Walt Anderson; Hydro Power Section Supervisor
020105 - Engineering Division
020106 - Mr. Mike Sims; Plant Superintendent; Engineering Division
Voith Contract Closeout
Planning meeting, 911009
0404 - ..
0405 - Summary/Objective
040601 - This meeting provided coordination between key DNRC personnel
040602 - involved in closing out the Voith contract and recouping extra
040603 - expenses owed to the Department.
040605 - The Sep 3, 1989, Agreement for the Speed Increaser and Voith contract
040606 - closeout was reviewed along with the meetings of June 25 and 26 which
040607 - led to it. Current status on performance of the Agreement was also
040608 - reviewed.
040610 - Task lists for DNRC personnel, consultants and contractors were made
040611 - and task dependencies were analysed. More needs to be done to
040612 - identify tasks, including obtain a CPM from Voith.
040615 - Follow Up Meeting
040617 - This management group will meet again oa Oct 31, to review progress
040618 - and make adjustments to plans and assignments.
Voith Agreement of Sep 3, 1991
Agreement 910903 to Replace or Retrofit
Speed Increaser Engineering Review to Order Replacing the Speed Incre
Notice of Defects/Failure
Vibration Data from Monitoring system
121001 - ..
121002 - Scope of Broadwater Close-out Effort
121004 - The agreement between DNRC and Voith dated 910903 defines major tasks
121005 - to closeout the Voith contract. It expressly calls out two tasks:
121007 - [On 911104 discussed with Tudor's engineering manager, John
121008 - Williams. ref SDS 10 0084
121010 - 1. Voith will replace the gear set in the speed increaser.
121012 - 2. The final contract punch list will be prepared by DNRC and
121013 - will thereafter be performed by Voith.
121015 - ..
121016 - Two additional tasks are implied in the Agreement:
121018 - 3. Evaluate correctness of the Speed Increaser housing relative
121019 - to contract specifications, and replace the entire speed
121020 - increaser if it does not conform to contract, in lieu of
121021 - merely replacing the gear set, task 1.
121023 - 4. DNRC will track extra expense incurred caused by Voith in
121024 - connection with steps 1 - 3, and make claim for recovery.
121027 - ..
121028 - Notice Procedures
121030 - With respect to task two (2) it was recommended that Tudor commence on
121031 - behalf of DNRC the notice procedure prescribed in the Agreement such
121032 - that seven (7) day notices to correct defects (punch list items)
121033 - issued prior to Sep 3, be withdrawn so there is a single baseline date
121034 - from which to evaluate performance. The baseline date will be the date
121035 - of submission of the "Final Punch" list called out in the Agreement.
121037 - This procedure will avoid confusion in the record and shows that
121038 - substantial completion has not occurred because the "Final Punch
121039 - List" was not determinable nor performed until at least Sep 1991.
121041 - The procedure further appears to conform with the intent of the
121042 - parties that all outstanding punch list items are to be performed
121043 - under the Agreement, plus such other items that became known dur-
121044 - ing annual maintenance (see ref DIP 4 item #5).
121047 - ..
121048 - Speed Increaser Housing (SIH)
121049 - Basis for Independent Evaluation
121051 - Task three (3) arises from the purpose of the Agreement that "... the
121052 - speed increaser [comply] with the specifications defined in Contract
121053 - 1189.1" (see DIP 4 p. 1 para 2).
121055 - There is some evidence that the Speed Increaser housing (hereafter
121056 - SIH) does not comply with the contract in that suspension bolts broke
121057 - and the noise of the unit exceeds 87 db called out in contract (see
121058 - ref DIP 1 p 13, 14, and Supplemental Bid Data p. 4).
121060 - External Support Bolting Defective
121062 - The original support bolting scheme failed and was modified by
121063 - Voith. This was not discussed at the Jun 25 and 26, meetings and
121064 - is not part of the Sep 3, 1991, Agreement, but it comprises an
121065 - issue to be reviewed in connection with approving the speed
121066 - increaser once Voith submits its shop drawings.
121068 - It appears Voith did not submit the design of its corrections and
121069 - Tudor did not approve the corrections.
121071 - ..
121073 - Voith admits the SIH was designed and manufactured defectively (see
121074 - ref DIP 1 line 15 - relating to the gears being supported with bolts
121075 - from the top rather than the bottom). Voith has indicated it used a
121076 - "prototype design" (ref DIP 1 p 18), but promised to "...fix that and
121077 - improve [DNRC's] confidence.
121079 - [The other bolting issue further indicates product defects and
121080 - that the unit was a "prototype."]
121082 - Voith maintains that it corrected all defects by making field modifi-
121083 - cations to bolt the SIH from the bottom (DIP 2 p 15). However, Voith
121084 - has admitted it does not "know," for example, if the bolting changes
121085 - it made corrected the vibration problem (ibid). DNRC needs substan-
121086 - tive and objective evidence that SIH is adequate in order to decide
121087 - whether to demand a new speed increaser, rather than merely replace
121088 - the gear set, as expressly called for in the Sep 3, 1991, Agreement.
121089 - This is the only means to improve DNRC's confidence.
121091 - [On 911104 discussed with Tudor's engineering manager, John
121092 - Williams. ref SDS 10 0084
121094 - DNRC's position is justified on the following grounds:
121096 - ..
121097 - Unauthorized Substitution
121099 - It appears Voith has not complied nor even attempted to comply
121100 - with the contract provisions relating to review and approval of
121101 - the speed increaser design, and in fact furnished a unit that does
121102 - not comply with the specifications rendering it an unauthorized
121103 - substitution (discussed more fully below).
121105 - Voith's reticence in submitting shop drawings does not instill
121106 - confidence that the speed increaser meets the specification or
121107 - that Voith is endeavoring to perform its contract.
121109 - ..
121110 - Lost Revenue
121112 - If the SIH requires future repairs, DNRC may loose considerable
121113 - revenue that would more likely not be lost if Voith installs a
121114 - properly designed and manufactured speed increaser that conforms
121115 - with the contract requirements, rather than repair its prototype.
121117 - If Voith assumed the risk of DNRC's lost revenue through the 30
121118 - year life of the speed increaser, then the Department may be
121119 - justified in relying on Voith's unsupported assurances that the
121120 - existing SIH is adequate [except for the potential of injury
121121 - to people, discussed below].
121123 - While DNRC contends it can recover lost revenue, the risk that
121124 - it cannot do so arising from Voith's refusal to so agree, means
121125 - that evidence the speed increaser complies with the contract is
121126 - the only source of confidence that it will last through its 30
121127 - year design life. Voith's agreement to merely extend the
121128 - warranty period by 2 years does not cover DNRC's exposure from
121129 - a product that does not meet the contract specifications.
121132 - Collateral Damage
121134 - The risk of collateral damage and attendant administration,
121135 - litigation and repair costs is inherent in complex equipment as
121136 - involved here. Recent observations of cracked concrete while not
121137 - conclusive, indicate a serious potential risk to DNRC that can
121138 - only be assuaged by evidence that the speed increaser meets the
121139 - contract specifications.
121142 - Liability for Injury to People
121143 - Duty to Investigate & Take Precautions
121145 - Since DNRC is now aware of potential problems, it has a duty to
121146 - take reasonable care to avoid the occurrence of same which could
121147 - result in injury. DNRC must insist upon evidence from Voith that
121148 - its speed increaser is safe and conforms to the contract specifi-
121149 - cations in order to avoid liability for future failure that
121150 - injures someone.
121152 - ..
121153 - Effect of Unauthorized Substitution
121155 - The express purpose of the Sep 3, 1991, Agreement is to replace the
121156 - gear set of the speed increaser. The language throughout the document
121157 - limits the scope of speed increaser work to just the gear set. If the
121158 - speed increaser is an unauthorized substitution that has never been
121159 - reviewed for compliance with the contract, it is not clear what weight
121160 - the Sep 3, Agreement can have in light of Voith's threshold duty to
121161 - submit information to obtain approval for alternates.
121163 - [On 911104 discussed with Tudor's engineering manager, John
121164 - Williams. ref SDS 10 0084
121166 - Even if the substitution is ultimately approved, the duty of care on a
121167 - wide variety of issues would seem to mandate that such approval be
121168 - granted only after heightened scrutiny of all design information
121169 - contemplated by the contract, rather than the limited review called
121170 - for in the current Agreement which seems to extend and accept Voith's
121171 - refusal to perform its contract submittal requirement.
121173 - Thus, does the Agreement fundamentally conflict with the contract
121174 - under the record here?
Submittals; Housing, Gears
Tudor's Failure to Perform
Defective Speed Increaser Must be Replaced
Vibration Data from Monitoring system
Disclose alternate design for speed increaser
2012 - Areas of Discussion
201301 - It appears that Voith improperly installed a speed increaser which is
201302 - defective and does not meet the contract spec. DNRC may properly
201303 - insist and likely should insist that Voith comply with the contract
201304 - approval procedures for alternates, in order to cure its failure to
201305 - perform.
201307 - Thus far the effort has been directed toward evaluating particular
201308 - narrow (though critical) aspects of the design under the Sep 3, 1991,
201309 - Agreement.
201312 - Gear Set
201314 - DNRC has hired Geartech to evaluate only the gear set.
201316 - Walt indicated Voith has met its obligations under the agreement
201317 - to submit within 7 days "...drawings and documentation regarding
201318 - the existing design," and to submit within 65 days similar data
201319 - for the new design.
201321 - Walt indicated Geartech has completed its review and returned its
201322 - comments through DNRC to Voith.
201324 - This task results from the Sep 3, Agreement, but does not address the
201325 - matter of the unauthorized substitution.
201328 - Housing Vibration & Alignment
201330 - Maritech is evaluating the vibration (and alignment ?) of the SIH.
201331 - Part of its evaluation consists of measuring actual vibrations occur-
201332 - ring at the plant.
201334 - Its report is due Friday, 911025.
201337 - Finite Element Analysis
201339 - Maritech will also review a "Finite Element Analysis" of vibration
201340 - problems. Voith promised to supply information needed for this task
201341 - under item #2a of the Agreement, ref DIP 3, but has not done so
201342 - contrary to its assurances to "cooperate" (see ref DIP 1 p 19).
201344 - Maritech's interim report submitted by DNRC to Voith on Oct 21 (ref
201345 - DIT 1), shows that in fact a serious vibration problem may occur if
201346 - the existing housing is re-used, as Voith intends. DNRC's Oct 21,
201347 - letter restates earlier written requests on Oct 9, and Oct 15, for the
201348 - "Finite Element Analysis."
201350 - If Voith fails to provide its Finite Element Analysis Information by
201351 - Oct 25, DNRC may contract with Maritech to perform an independent
201352 - study to develop this information.
201354 - This task results from the Sep 3, Agreement, but does not address the
201355 - matter of the unauthorized substitution.
201358 - Vibration Detector
201360 - This part of the speed increaser is not working due to incorrect
201361 - design of the interface with the electrical system.
201364 - Unauthorized
201365 - Speed Increaser Substitution
201367 - Voith installed an "alternate design" speed increaser under section
201368 - 11257 para 2.1I, and admits the ring gear suspension bolting system
201369 - was a "new idea" which did not work, and which had not been used on
201370 - other projects, contrary to the contract. The structural bolting
201371 - scheme failed and required modification which has never been submitted
201372 - by Voith for Engineering approval, which must still be rendered.
201373 - ..
201374 - On July 3, 1989, Tudor's Resident Engineer, Kurt Shulz, reported
201375 - to John Williams and Roberto Iniguez that Voith had installed a "pre-
201376 - sumably unauthorized substitution." There are no shop drawings,
201377 - change orders or other record of approval of this substitution. Voith
201378 - submitted on July 14, 1989, as its only support for the substitution
201379 - minutes of the post-award meeting on Nov 4, 1987, the following two
201380 - line comment:
201382 - 2.1.A - The speed increaser is not double helical, it is a spur
201383 - gear. Renk will meet the AGMA specs, thus this is acceptable.
201385 - This comment merely indicates willingness by the Engineer to approve
201386 - the change, if Voith can demonstrate through shop drawings and other
201387 - standard submittal information that its assertion is true. However,
201388 - it has not done so. Tudor's submittal log (file 00730) indicates
201389 - Voith did not submit shop drawings or documentation of satisfactory
201390 - use on other projects as provided in contract section 11257 para
201391 - 2.1 I.
201393 - Therefore, apart from whether DNRC can satisfy itself with respect to
201394 - particular sub-systems (e.g. gear set) of the speed increaser, DNRC
201395 - should insist that Voith now comply with the contract requirements to
201396 - obtain approval for its alternate and if an an adjustment in price is
201397 - warranted relative to the contract specification, it should be made
201398 - to the benefit of DNRC.
201400 - Voith maintains the SIH is "...similar to other projects, typical. We
201401 - are willing to cooperate," and has offered to supply a list of other
201402 - projects where this SIH design is installed (ref DIP 4 p 19.) Voith's
201403 - position in this regard appears to conflict with its admission that it
201404 - tried a "new idea" with the design of the speed increaser for
201405 - Broadwater (ref DIP 4 p 16.).
201408 - Follow Up
201410 - DNRC is well positioned to demand that Voith comply with the contract
201411 - provisions to support substitutions. It would be helpful to have a
201412 - single Engineer carry out this task, as contemplated by Voith's con-
201413 - tract, the cost of which should be chargeable to Voith. DNRC is
201414 - mitigating the damage by its diligence in arranging the aspects cited
201415 - above. Voith seems to be compounding the damage by failing to cooper-
201416 - ate.
2308 - General
230901 - The specified vibration detection system has not worked.
230903 - Voith committed to provide within seven (7) days of signing the Sep 3,
230904 - 1991, Agreement, a plant operations plan to be followed by DNRC and a
230905 - comprehensive vibration monitoring system, including a computer to
230906 - capture critical data. It failed to perform either task.
230908 - DNRC has been operating the plant based on Voith's recommendations of
230909 - July 29, 1991.
230911 - ..
230912 - Collateral Damage & Notice
230914 - Evidence of possible collateral damage from excessive vibration has
230915 - emerged within the past week or so.
230917 - Hire Structural Engineer
230919 - DNRC or Tudor will hire a structural engineer to investigate and
230920 - report on the cause of the observed damage to the plant.
230923 - Welch submitted a proposed notice to Voith and demand to perform with
230924 - respect to this matter, ref SDS 9 and DIP 5.
230926 - Sarah is editing this notice and will issue a demand that Tudor
230927 - "direct" that Voith perform its agreement and that Tudor inform
230928 - DNRC of any additional steps Tudor believes should be taken in
230929 - connection with this matter to protect DNRC's interests.
230932 - Installation by Voith
230934 - Walt indicated some monitoring equipment has been delivered to the
230935 - plant within the past few days. Walt understands from discussions
230936 - with a Voith vendor that work may commence next week on installation.
230938 - Subsequently this has been changed to mid-November.
230941 - Computer by DNRC
230943 - Walt indicated DNRC intends to supply the computer for the vibration
230944 - monitoring plan which Voith agreed to furnish under the Sep 3,
230945 - Agreement.
230947 - Action needs to be taken so the computer is available when Voith
230948 - completes its monitoring system installation, which appears now like
230949 - it will be between mid and late November.
Claims by DNRC Against Voith
Procedures & Accounting
260601 - ..
260603 - Procedures were considered for capturing DNRC cost chargeable to
260604 - Voith. Adjustments to existing practice were developed to support
260605 - claims DNRC expects to make against Voith.
260607 - Contract v. Operations
260609 - Procedures for segmenting contract closeout work and expense from
260610 - other DNRC operations were considered.
260612 - This meeting sets out some of major tasks that distinguish contract
260613 - closeout work from plant operations.
260616 - Minor Corrections/Mitigation
260618 - DNRC has been absorbing the expense of "minor" corrections, as a
260619 - courtesy to Voith and to expedite the work. It was decided to adopt a
260620 - procedure of notifying Voith and Tudor of such corrections, to permit
260621 - them to authorize same in order to avoid inadvertent damage to other
260622 - aspects of the plant which would otherwise be the responsibility of
260623 - Voith.
260625 - Welch will prepare a form DNRC personnel can fill out for this
260626 - purpose.
260629 - Voith Backcharge Account #
260631 - Walt will obtain from DNRC accounting an account number for
260632 - identifying DNRC activities chargeable to Voith. This will be used by
260633 - DNRC to charge time and other expense incurred to correct Voith's
260634 - failure to perform its contract obligations.
260637 - Record keeping Procedures
260639 - Mike and Brian are entering in a plant "log" explanations of work
260640 - performed and problems encountered. Matters chargeable to Voith will
260641 - be identified by contract plan and/or specification section with an
260642 - explanation of what was found, what was done and how long it took.
260645 - Documentation by Experts
260647 - DNRC should strive to have any requests or demands it makes to Voith
260648 - supported by written reports from its experts. If an expert needs
260649 - information to perform its work, it should be requested to write a
260650 - letter stating what it needs and why. This removes some of the burden
260651 - DNRC has been forced to assume by the absence of Tudor.
260653 - It also helps build chronologies of what is done and why, which will
260654 - be helpful in both continuing management of issues and resolution of
260655 - claims.
Legal overview, strategy and opinion
Presumed Damages, Voith
CPM showing expected progress and constraints
Record of Plant Problems
Engineer's duty to determine disputes
3109 - General
311001 - The Agreement with Voith gives rise to the following planning
311002 - requirements:
311004 - 1. Identify the key players (including Engineering Manager)
311006 - 2. DNRC needs a CPM showing major activities to complete the
311007 - contract and the dependency relationships thereof to insure
311008 - timely support of vendors and minimal down time of the plant,
311009 - and overall expense to DNRC.
311011 - 3. Voith, as the major contractor, needs to supply CPM scheduling
311012 - information to support DNRC's management and oversight of the
311013 - contract.
311015 - DNRC needs to complete the CPM analysis of the tasks DNRC needs to be
311016 - doing, which was begun today in the meeting.
311019 - Closeout and Settlement/Litigation Strategy
311021 - Sarah will prepare a memo opinion explaining DNRC's strategy and
311022 - options in closing out the contract and settling disputes. Wayne
311023 - feels this is a good idea because her work product is not
311024 - discoverable.
311026 - Engineering needs a legal opinion on what constitutes contract
311027 - completion, and substantial completion. DNRC has done some work on
311028 - defining substantial completion relative to the Full Operation date.
311029 - Wayne presented some ideas today that would result in the Full
311030 - Operation Date still being open.
311032 - After preparing the support and rationale of Tudor's Oct 5, 1989,
311033 - determination of backcharges from the Sletten contract to Voith, Welch
311034 - will prepare an analysis that develops the legal opinion and Wayne's
311035 - ideas into a claim against Voith to recover the actual delay damages
311036 - DNRC has suffered, for submission to the Engineer. The Engineer will
311037 - then make a determinations on all matters, and issue change orders as
311038 - warranted. Voith and DNRC can then arbitrate any differences with
311039 - Voith.
311042 - Lee Engineering Report
311044 - This is required to support the punch list. Walt will meet with Lee
311045 - Engineering to determine progress and scope.
311048 - Submit Punch List
311050 - DNRC will issue the Punch List to Voith after reviewing Lee
311051 - Engineering's report and after assigning contract plan and
311052 - specification identifications. This submittal will ask Voith to
311053 - provide a CPM showing when the tasks of re-design, submittal,
311054 - approval, procurement, manufacture and installation will occur.
3204 - Discussion
320501 - This is the list requested in the Sep 3, 1991, Agreement. It is the
320502 - other major piece of work required to close out the contract.
320504 - Mike will complete a list of all pending items by Friday, 911025.
320506 - He will indicate the items that need to be done now and those
320507 - that can be done when Voith wishes to schedule them.
320510 - Warranty v. Contract Items
320512 - Consideration was made to distinguish warranty from contract work. The
320513 - issue is whether the warranty has actually begun to run on anything.
320514 - It seems this may be so, but it is not clear how to set that date,
320515 - since DNRC has been producing power, albeit not at the capacity
320516 - expected in entering the project.
320518 - The legal and engineering analyses are needed for this.
320520 - Another method would be simply to submit everything as punch list and
320521 - let Voith present the case, if it wishes to do so, why a particular
320522 - item should be one thing or another.
Organize existing record,
Claims by Owner against
Admin Procedures, Defective
3406 - Discussion
340701 - Charity is working on completing chronologies of documents between
340702 - various parties.
340704 - Sarah advised a meeting is scheduled for Friday to clarify the
340705 - direction of this work.
340708 - Tudor to Voith Documents Found
340710 - The entire body of documents issued by Tudor to Voith from contract
340711 - inception to April 1989, seemed to be missing in the record.
340713 - JoAnn Finn recently explained that Tudor filed these documents and
340714 - commingled them with those to others within the Sletten contract
340715 - records for documents issued by Tudor.
340717 - It would be helpful if Charity could segment the following documents
340718 - so there are separate chronologies:
340720 - Tudor to Voith source = Tudor files
340721 - Tudor to DNRC " " "
340722 - DNRC to Voith " DNRC "
340723 - DNRC to Tudor " " "
Formulate Closeout Agreement
Need for Engineer
Engineer's duty to determine disputes
3908 - General
390901 - There are a broad range of engineering management matters involved in
390902 - the successful closeout of the contract.
390904 - Consideration was given to, at a minimum, develop a consulting
390905 - relationship with an Engineering firm that can coordinate the effort
390906 - and direct Voith to perform in the manner required by the contract.
390908 - We would also like an Engineer to rule on DNRC claims.
390910 - It might also be fruitful to contact other hydro plant owners who have
390911 - experience of this kind so see how these matters have been handled.
390914 - Tudor
390916 - Wayne will call John Williams to request a meeting with Welch during
390917 - the week of Nov 4, to discuss the above matters.
Distribution. . . . See "CONTACTS"