The Public Eye

Sacramento sewer contractor faced delays, minority hiring violations

District engineer Prabhakar Somavarapu points to a line of pumps in the miles of underground tunnels at the wastewater treatment plant for the Sacramento Regional County Sanitation District near Elk Grove on Friday, May 16, 2014.
District engineer Prabhakar Somavarapu points to a line of pumps in the miles of underground tunnels at the wastewater treatment plant for the Sacramento Regional County Sanitation District near Elk Grove on Friday, May 16, 2014.

The contractor selected for a $414 million Sacramento sewer project failed to finish major projects on time in Florida and Washington state and was accused of violating federal labor law in New York, raising questions about why the company was chosen here.

Board members of the Sacramento Regional County Sanitation District in April cited the need to meet a state-imposed deadline and the contractor’s agreement to hire local union workers as reasons for hiring Dragados USA to build a biological nutrient removal station. The board rejected complaints by losing contractors that Dragados violated anti-collusion laws because another contractor with the same owner as Dragados bid on the project.

Dragados USA has been at the center of a well-publicized delay to build a highway tunnel in Seattle and was once removed from the Florida Department of Transportation’s list of qualified contractors because of project delays and other problems.

The company declined to comment for this story, directing all questions to the Sacramento sewer district.

District engineer Prabhakar Somavarapu, the district’s top official, said he’s not concerned about the Seattle-based contractor’s ability to meet the project deadline of May 2021. The work is part of a larger $2 billion treatment upgrade necessitated by a state decision that forced the district to reduce pollution in its wastewater discharge. In April, district officials warned the board that a rebidding process could lead to costly delays.

Somavarapu said Dragados has been actively working to prepare for the project and will receive assistance from other contractors familiar with the sewer upgrade by working on related projects.

Dragados and a partnering contractor were accused by federal prosecutors in 2012 of breaking promises to hire minority contractors as part of a tunnel project in New York. Dragados and its partner settled the civil claim in U.S. District Court and agreed to pay $7.5 million to the government.

Dragados and a partnering contractor have been in the news regularly in Seattle because of a long-delayed project to build a Highway 99 tunnel along the city’s waterfront. Dragados and the other contractor had promised to finish the work by December 2015, but current estimates peg its wrap-up date to May 2018.

The main reason for the delay has been the failure of the contractor’s tunnel-boring machine called Bertha, according to an independent review panel hired by the state. Bertha’s malfunction and repair held up the project for two years, the panel found.

Then in January of this year, Gov. Jay Inslee ordered a halt to the tunnel boring when a large sinkhole was found over the tunnel. The project has since resumed.

In 2014, board members at the Los Angeles County Metropolitan Transportation Authority cited problems Dragados had in Seattle and elsewhere as reasons for rejecting its bid for a $1.6 billion subway line extension, even though Dragados was the lowest bidder with an offer that was almost $200 million less than the winning bid. Metro staff found that Dragados had a high probability of exposing the agency to cost overruns and project delays.

The Florida Department of Transportation cited project delays and other problems as reasons not to accept bids from Dragados from July 1, 2015, through Jan. 22, 2016, according to Evelyn Hernandez, an FDOT spokeswoman. The department reached a settlement with Dragados in January that allowed the company to resume bidding on state contracts.

Dragados has five current contracts with the department, all of which are expected to take more time than originally agreed, according to the department’s website. Hernandez said the department will likely seek damages for three of the projects, while the other two “have a variety of materials and workmanship issues that will have to be addressed before FDOT will accept the work.”

In a written response to the department, a Dragados official attributed the project delays to a range of issues specific to each project and generally to an inability to retain enough employees because of an abundance of construction work in the state.

Labor issues were at the center of Dragados’ legal problems in New York, where the company and its partnering contractor, Judlau, were accused in U.S. District Court in 2012 of violating hiring agreements on a federally funded tunnel project. The companies signed paperwork saying they had paid minority contractors for work on the project, but instead paid the minority firms a “pass-through” fee and arranged for work to be performed by others, the federal government charged in its civil complaint.

According to the complaint, executives at Dragados were not only aware of the fraudulent scheme, but actively participated in it.

As part of the settlement, Dragados and the other company “admits, acknowledges and accepts responsibility” for submitting forms that wrongly make claims about payments to minority contractors, according to the agreement filed in U.S. District Court.

Dragados is required to hire minority contractors to provide a portion of the Sacramento sewer work because some funding will come from the federal government.

Additionally, Dragados has pledged to hire local union workers to carry out a portion of the sewer work. Sewer board members cited that promise as a reason to hire the company when they approved the Dragados contract after Sacramento union leaders supported Dragados.

Unlike the minority contractor requirement, the hiring of union labor is not mandated. District engineer Somavarapu said any labor agreement is between Dragados and the unions, and the district has no role in it.