January 26, 2015

SR-99 Tunnel Dispute Review Board Sides with Contractor in DSC Dispute

By Sarah Washburn

In a change order dispute between SR-99 replacement tunnel contractor Seattle Tunnel Partners (STP) and the Washington State Department of Transportation (WSDOT), a dispute review board has placed responsibility on the State for differing site conditions at the SR-99 replacement tunnel’s launch pit.  This particular dispute began in late 2012, when STP filed a $20 million change order request, alleging differing site conditions (mainly severe groundwater flows) in the launch pit at the replacement tunnel’s south portal.  Among other things, STP alleged that extensive pumping was required in the area of the south launch pit and that it encountered leaks in the launch pit itself.  WSDOT rejected the request and the parties agreed to submit the dispute to a tunnel dispute review board provided for in the parties’ contract.  The dispute review board is composed of three experts chosen jointly by the parties.


On January 22, the dispute review board concluded that the State should pay the bill because groundwater conditions differed from the data the State provided to contractors prior to awarding the tunnel contract.  The board did not decide how much the State owes – that number, if State accepts the board’s decision, will be negotiated with STP upon further documentation of actual costs incurred.  The sum could be covered by the parties’ existing $1.44 billion tunnel contract, which contains a built-in $40 million fund for unexpected soil conditions and major interventions.  However, STP has already made a total of $210 million in change order requests, including $125 million that STP seeks for repairs and delays associated with the tunneling machine (Bertha) itself.  In that dispute, STP alleges that a pipe omitted in the design plans caused Bertha to break down in late 2013.  Both sides have agreed to submit that dispute to the  tunnel dispute review board, with a hearing scheduled for March 2015.  At any rate, concern exists that the State’s liability could exceed the $40 million fund when all is said and done on the project.

As a general matter, the dispute review board’s conclusion is not the final say on this issue, as the parties may negotiate or utilize other methods of dispute resolution provided in the contract.  The board’s views, however, could play a role in any future arbitration or litigation.