After months of acrimony over the Palmview sewer project, Agua SUD fires OG Construction

The Agua Special Utility District fired OG Construction — one of two contractors hired to build the Palmview sewer system — on Wednesday after months of legal wrangling.

Edinburg-based OG Construction started work on the Palmview sewer project in September 2017. Two years later, the project remains incomplete.

AguaSUDLogoThe decision to terminate OG Construction will likely result in litigation, which could last for years and delay the project indefinitely.

“OG Construction has failed to perform its work per contract,” according to a statement released Wednesday by Frank Garza, an attorney for the utility district. “OG Construction is months behind schedule and its work contains uncorrected deficiencies. Despite ample notice and months of time to address its default, and after every opportunity has been provided by the District to OG Construction to prevent termination, the District has been left with no choice other than to terminate the contract with OG Construction.”

OG Construction fired back, accusing the utility district of acting in bad faith.

“Our Office is both shocked and disappointed in the Agua SUD Board’s decision today, which can only be explained as personal vendetta against O.G. Construction,” according to a statement released Wednesday by attorney Jonathan L. Almanza, who represents the company. “The Project is over 99% complete, and instead of working amicably with O.G. Construction to see that the little left of project is completed, the Board chose this time to terminate to avoid ever paying O.G. Construction for its services. Since the project’s inception, the Board never wanted O.G. and the contract was only provided because of the State’s intervention due to Agua SUD’s failure to comply with the law. It is no secret that politics combined with government contracts can be difficult and dirty. For anyone who has ever worked with a governmental entity, you are aware that you are at the mercy of a Board, who only risks the monies of its taxpayers.”

The utility district and OG Construction had an acrimonious relationship from the beginning.

In November 2016, the utility district solicited bids for what is called “Group A&G” of the Palmview sewer project.

OG Construction submitted the low bid: nearly $11.3 million.

Then-Executive Director Oscar Cancino, however, became concerned OG Construction couldn’t handle the project. At his recommendation, the utility board selected Saenz Brothers Construction, which bid about $12.3 million.

The utility district explained the decision in a letter to the Texas Water Development Board.

“While OG did demonstrate some experience with respect to sewer, water and utility projects such as the one at hand, those projects were of a much more limited scope,” according to the letter. “In comparison, Mr. Cancino noted that SB’s submittal demonstrates significant experience with respect to both the scope and nature of the District’s Project.”

The decision also had a political dimension.

OG Construction is owned by Omar Garcia, the son of former Hidalgo County Judge Ramon Garcia.

At the time, members of the utility board counted Ramon Garcia among their political opponents. They also considered him an ally of state Sen. Juan “Chuy” Hinojosa, D-McAllen, who had become increasingly concerned about poor management and politically motivated decisionmaking at the utility district.

The utility board eventually agreed to accept the OG Construction bid. The relationship between OG Construction and the utility district, though, remained fraught.

Both OG Construction and Mercedes-based L&G Construction, which handled Group B&F of the sewer project, had problems with groundwater. They fell months behind schedule, which frustrated the board and left Palmview residents with unpaved streets.

Tension between OG Construction and the utility district flared in June, when the board hired an independent company to inspect OG Construction’s work with remote-controlled cameras.

OG Construction filed a lawsuit and requested a temporary restraining order, which wasn’t signed by the judge.

Attorneys for OG Construction and the utility district engaged in an extended back-and-forth, preparing for litigation. They appeared to reach an agreement in August, but tensions flared again in mid-October.

During a roundtable discussion hosted by the city, Omar Garcia blamed the utility district for refusing to accept completed work, which delayed street paving.

“We are bonded. We are insured. We provide warranties. We do work all over the county. We’ve been doing this for years and years and years,” Omar Garcia said on Oct. 18. “We have never had the situation we have with Agua.”

The utility district flatly rejected that characterization.

“While completing the work on this long-delayed project remains a high priority, the District refuses to accept substandard work for the sake of completion,” according to the statement released by the utility district. “Under the terms of the contract, the District will require all work be free of defects and the District will not issue OG Construction a certificate of substantial completion until all work is satisfactorily complete and all deficiencies have been corrected. To date, OG Construction has repeatedly refused to remedy their damaged and defective work. Instead, OG Construction has put forward excuses and has spread untruths about the Project in meetings and with the press.”

OG Construction stood behind its work.

“In regards to Agua SUD’s assertion that O.G.’s work was defective and that the decision to terminate was made for the benefit of the community, to those who are familiar with the project, this is simply untrue,” according to the statement released by the company on Wednesday. “Confirmed deficiencies were remedied and, until today, O.G. was promised a sealed engineering report to confirm other deficiencies before mobilizing to correct them. The report never came, because the engineer for Agua SUD refused to adopt Agua SUD’s alleged deficiencies with its professional seal. O.G. encourages the community to make an effort to understand the full details of this project before concluding that any one party is responsible. O.G. Construction will be vindicated in a court of law, should that become necessary, and will show that the project was delayed through no fault of the Contractor. That said, O.G. sincerely hopes that litigation is not necessary to move forward in negotiating an expeditious resolution of this project for the community of Palmview.”

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