An important news story by Ben Horowitz and Seth Augenstein of the Star-Ledger. A new report shows that the companies behind the Sussex solar mess were culpable. They do not deserve to be protected by the terms of the bailout, including the "hold harmless clause" and the gag order (non-disparagement clause).
Morris County got the resignations of Gabel and Pearlman. Sussex County had the opportunity to follow their leadership at Wednesday's Freeholder Board meeting and didn't. When will they?
Official: Solar project design flaws and site changes led to millions in cost overruns
"Significant" cost overruns occurred in the solar project at the County College of Morris, according to the county's construction administrator. (Courtesy of Sunlight General Capital)
By Ben Horowitz and Seth Augenstein | NJ Advance Media for NJ.com
on April 10, 2015 at 9:05 AM, updated April 10, 2015 at 12:32 PM
MORRIS COUNTY — Design drawings that had to be changed, construction that had to be redone and the changing of sites contributed to cost overruns that led to lawsuits resulting in a $66.3 million arbitration award in a three-county solar project that fizzled, according to a report by the project's construction adminstrator.
The cost overruns were part of a 71-project, $88 million solar project bonded by Morris, Somerset and Sussex counties in 2011.
In 2013, the contractor, MasTec, sued the developer, SunLight General, saying it had performed more than $79.2 million worth of "construction services" for solar projects, but had been paid only $33 million by Sunlight, leaving it short by $46.2 million, according to court documents.
In 2014, an arbitrator awarded an even greater sum -- $66.3 million -- to MasTec. That included $59 million SunLight owed MasTec following cost overruns, along with interest.
SunLight was declared in default and the counties, which held the ultimate responsibility for the project, were on the hook for the debt. They settled with MasTec for $21 million in February, effectively bailing out the project.
Earlier this month, Steve Gabel, the head of energy consultant Gabel Associates, and Stephen Pearlman, the Morris County Improvement Authority's attorney who advised on the projects setup, both submitted letters of resignation, effective June 1.
But before leaving, Gabel Associates prepared a report summarizing the causes of the cost overruns. The report was intended to be confidential but was released by the Morris freeholders on Wednesday.
Gabel, describing its role as "liaison" between the various parties to monitor the status of construction, said it did not have authority to approve design drawings or direct the projects.
Discussing problems that led to cost overruns, Gable said in some cases, sites that had been expected to get solar panels could not be included in the program for reasons including "structural inadequacy" and some areas that did not meet SunLight's "shading tolerances."
Cost overruns resulted from the elimination of carport structures at the Randolph Board of Education building and from the Morris School District's decision not to proceed with the program, Gabel said.
Those decisions required the developer and contractor to identify additional projects that could generate another 2 megawatts of electrical power, Gabel said.
There were also problems with MasTec's initial design drawings, Gabel said.
MasTec hired the same engineering design professional, Innovative Engineering Inc., to complete the designs in all three county-wide projects, Gabel said.
That workload "stressed IEI's resources" and "some drawings were in conflict with elements of the National Electrical Code," Gabel said.
Some of the problems included improper sizing of conductors and the running of unfused conductors for lengths greater than permitted by local inspectors, Gabel said.
As a result, proposed changes were sent to IEI and site drawings had to be updated. That resulted in delays in submitting updated drawings to SunLight and delayed the start of projects, Gabel said.
Because "time was of the essence," MasTec directed its contractors to start the field work, "which it did at its own risk as it elected to proceed without approved construction drawings" from SunLight, Gabel said. However, the report added, at no time did electrical contractors perform work that violated standard industry practices or the electrical code.
As a result of these design issues, work was frequently started without approved construction drawings and that led to much of the work "having to be redone" due to SunLight's requirements for material and equipment, Gabel said.
While MasTec had sometimes worked without construction drawings, SunLight was insisting on "enhanced standards" that "went above the normal, accepted practices of the industry," Gabel said.
"Use of the enhanced standards led to cost overruns, especially in light of the fact that much of the work had been completed using other methods and required redoing," according to Gabel.
A "significant" cost overrun occurred at the County College of Morris, Gabel said.
That project had "inadequate design drawings, issues with material delivery (caused by the canopy manufacturer) and problems in the construction of the canopy structures," Gabel said.
Gabel concluded that is findings are "not intended to disparage any party in the Morris Renewable Energy Program, nor does it ... assign fault to any party."
"The report is only intended to provide factual information in response to the request of Morris County for information on the basis of cost overruns," Gabel said.
Morris Freeholder David Scapicchio, who voted against the settlement, called the situation "unbelievable."
"What led to the bulk of the cost overruns was building specifications that were not approved," Scappichio said. "When they finally did get a set of approved drawings, they had to start over."
Scappichio agreed that even though SunLight owed MasTec money, and the counties wound up paying, MasTec was "absolutely at fault" in many areas.
"A lot of stuff was designed improperly," he said.
Scappichio reiterated that it was unfair that the counties wound up "holding the bag" for the mistakes of others, but he acknowledged that was how the contracts were structured.
Officials at SunLight were unavailable for comment on Thursday and officials at MasTec could not be reached.
Ben Horowitz may be reached at bhorowitz@njadvancemedia.com. Follow him on Twitter @HorowitzBen. Find NJ.com on Facebook.
http://www.nj.com/morris/index.ssf/2015/04/official_says_problems_with_design_drawings_and_ch.html#incart_river
Sussex County Watchdog
