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Document reveal that Agua SUD considered terminating Palmview sewer project contractor

This article originally appeared in the Friday Oct. 4, 2019 issue of the Progress Times.

When the Agua Special Utility District board met on Sept. 16, members had a major decision to make.

Construction on the Palmview sewer project had started in 2017. Two years later, the work still wasn’t finished — and Palmview residents were furious.

AguaSUDLogoMembers of the utility board weren’t happy either. They apparently discussed whether or not to terminate Edinburg-based OG Construction, which had been hired to install sewer pipes throughout the city.

The board spent 69 minutes in executive session that night but adjourned without taking any action. General Manager Jose E. “Eddie” Saenz sent a letter to OG Construction the next day.

“This letter is to inform O.G. Construction Company, LLC’s (‘O.G. Construction’) that the Agua Special Utility District (Agua SUD) Board of Directors (the ‘Board’) met yesterday evening and has determined not to issue the notice of termination to O.G. Construction as of today in reliance on OG’s representation in its letter dated September 16, 2019 that it will cure the default and complete the Project,” according to the letter.

The Progress Times requested all communication between the utility district and OG Construction under the Texas Public Information Act.

The documents, which the utility district released Sept. 27, reveal how close the utility board came to
terminating OG Construction — and that after months of tension they may be able to complete the project without a lawsuit.

“OG is in the process of completing remaining work items and correcting certain deficiencies,” according to a statement released by the utility district. “OG has reaffirmed its commitment to Agua in writing including the correction of all deficient and unacceptable work. Agua expects OG to honor that commitment and complete the Project in accordance with the specifications.”

The utility district and OG Construction had a rocky relationship from the start.

OG Construction submitted the low bid for part of Phase 1 of the project, offering to complete the work for about $11.3 million. The utility board, however, wanted to award the contract to Saenz Brothers Construction, which bid about $12.3 million.

While Saenz Brothers didn’t submit the low bid, the utility board believed that OG Construction wasn’t prepared to handle the project.

The dispute also had a political component.

OG Construction is owned by Omar Garcia, the son of former Hidalgo County Judge Ramon Garcia. At the time, members of the utility board perceived Ramon Garcia to be aligned with their political opponents.

Problems with groundwater and the sewer system plans, which hadn’t been updated to reflect new development in western Hidalgo County, delayed the project.

OG Construction blamed the utility district and S&B Infrastructure, which supervised the project. The utility district blamed OG Construction, which some board members believed simply couldn’t handle the job.

Tension between OG Construction and the utility district escalated during the past year.

The utility district hired a contractor to inspect OG Construction’s work with remote-controlled cameras. OG Construction complained the contractor had accessed job sites without authorization.

In an attempt to diffuse the tension, state Sen. Juan “Chuy” Hinojosa hosted a meeting between OG Construction and the utility district on Aug. 22.

Saenz, board President Lloyd Loya and Frank Garza, an attorney who represents the utility district, met with Omar Garcia and Jonathan Almanza, an attorney who represents OG Construction.

“As discussed, all parties agreed to jointly inspect the claims of work deficiencies and agreed to go to mediation for the claims that had been asserted and/or left unanswered by the Owner and/or Engineer,” according to a Sept. 9 letter from OG Construction to the utility district.

Two weeks later, however, the utility district sent OG Construction a formal “Notice to Cure,” a procedural step required before terminating the contract.

The utility district attached a letter from S&B Infrastructure.

“S&B is of the opinion that the project objectives and contractual obligations by Contractor are not being met and will result in additional project delays, non-timely completion, and potential deficiencies in the quality of work,” according to the letter from S&B Infrastructure. “Furthermore, the communication and working relationship with Contractor is currently problematic in terms of addressing deficiencies observed. Directives issued as comments and observations are typically challenged and/or not acknowledged as valid. Contractor has taken a confrontational posture toward Owner by disregarding directives aimed at correcting deficiencies so the work can be brought into compliance with the project plans and specifications.”

OG Construction responded on Sept. 9, questioning why the utility district would attempt to terminate the contract when the company had completed 98% of the work.

“If we cannot resolve these other minor issues, the residents of the area will only be given further delay and inconvenience, rather than a finished project,” according to the Sept. 9 letter. “We find it frustrating that, after months of written notice letters and written requests for mediation/meetings and non-payment, Owner/Owner’s Representative chooses to make its only written response a notice of potential termination. This is frankly shocking in light of how little is left on this contract and O.G.’s continued work, even without payment. We are resolved to complete this job and fix these issues. We look forward to reaching an amicable resolution.”

By the time the utility board met on Sept. 16, the S&B Infrastructure engineer assigned to the project, Reddy V. Kajuluri, had been replaced. The utility district also hired an Austin-based attorney, Jeffrey Chapman, who specialized in construction litigation.

In a written statement, the utility district disputed that OG Construction had completed 98% of the work. Asked what percentage had been completed, the utility district declined to comment.

“Agua SUD continues to work with its contractor, OG Construction, to address areas of concern and items of deficient work. While completing the work on this long delayed Project remains important, Agua will not accept substandard work for the sake of completion. Presently, Agua has provided OG a list of items that require correction to ensure the installed work complies with the Project’s design and TCEQ regulations,” according to a statement released by the utility district, which referenced Texas Commission on Environmental Quality regulations. “At this point in time, Agua SUD has not terminated the contractor nor has Agua SUD made a demand on the contractor’s surety to complete the Project. Agua SUD believes the recent Project correspondence provided to various news outlets pursuant to Texas Public Information Act requests speaks for itself and offers no further comment at this time.”

OG Construction also responded to questions with a written statement.

“O.G. Construction is committed to completing the project as soon as possible and understands the frustration and inconveniences that the community has had to endure. Over the last month, Agua SUD and O.G. Construction have been diligently working to take the necessary steps to make sure that the remaining issues are expedited for completion. Great progress has been made to resolve many of the issues that delayed the project for so long,” according to the statement released by the company. “Regardless of any ongoing disputes, O.G. Construction is committed, and always has been committed, to completing the project no matter the circumstances or delays beyond its control. In addition, regardless of the cause of these delays, O.G. Construction understands the community’s frustration and knows that their anger is warranted.”

The statement emphasized that OG Construction is close to completing the project and wants to resolve any remaining issues with the utility district.

“Less than 1.5% of the project is remaining, and the completion date is near, minus only a few remaining issues,” according to the statement released by the company. “O.G. Construction and Agua SUD are committed to working together to get this project completed as soon as possible.”

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