22 Aug 2014
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Solar Project Payment Dispute Lands in Federal Court

Local subcontractors fight to get reimbursed from private developers for Hopatcong schools project.

Solar Project Payment Dispute Lands in Federal Court

The shining promise of cheaper electric power provided by the Hopatcong school district’s solar energy project has been tarnished by a legal dispute between the original private developers that has left three local subcontractors unpaid for work they provided more than a year ago.

The Hopatcong schools’ solar project called for a 1,525-megawatt system powered by 5,000 solar panels installed over vacant school property and on the roofs of three schools. The roofs at two of schools were also rebuilt to accommodate the weight of the solar panels, a $500,000 expense.

The system is designed to provide between 85 and 90 percent of the electric power used by the board of education offices, Durbin Avenue School, the high school, the middle school, Tulsa Trail Elementary and the district’s maintenance shed. The district is projected to save $3 million in electric costs over the 15-year contract. The system went online in March 2012, roughly six months late.

The project cost $1.224 million. The system was built by SunEdison, of Pennsauken, and SP-One, LLC, of Philadelphia, the general contractor.

The completed system is owned by SunEdison, and the school district is the electric customer.

The school district does not own the solar installation, said Neil Piro, the school district’s facilities manager.

The choice of subcontractors was made by the general contractor, SP-One, he said.

According to a lawsuit filed in federal court by SunEdison, SP-One during the construction of the project, failed to meet agreed-upon timeline and financial obligations, resulting in Sun Edison being forced to hire a second general contractor to complete the project.

SunEdison is seeking damages based on its claim that SP-One failed to live up to the terms of their contract.

The dispute left Precast Manufacturing Co., of Phillipsburg, Bennett Sand & Gravel, of Sparta, and Adler Cos. unpaid. All three companies were hired by a subcontractor, Pitbull Electric, of West Berlin, according to a federal lawsuit and was also not paid by the main contractor, SP-One LLC, and has apparently since gone out of business.

Calls to telephone numbers listed for Pitbull Electric resulted in a recorded message that said the number was no longer in service.

Greg  Fisher, owner of Precast Manufacturing, said his company provided $13,000 of concrete light pole bases for the project.

Frank Bennett said his company was owed about $25,000 for gravel, and is still owed $9,003, while Mike Adler of Adler Cos., a service company, is owed $27,125 for vacuuming and clean-up services.

“It’s not fair that the school district is benefiting from the use of the electricity and SunEdison has the benefit of  the contract with the school, but we have not been paid,” Fisher said.

As the owner of a small business, $13,000 represents a sizeable loss, he said.

Fisher, Bennett and Adler said they were hired by Pitbull Electric, the subcontractor on the project hired by main contractor SP-One of Philadelphia.

Each has tried to collect their earnings, to no avail. One concern they all raised, which each discovered after their work was completed, was that the contract  did not include a payment bond, a fairly standard clause for such construction work.

The project did include a performance bond, which insured the work would be completed.  That performance bond was insured  by Zurich America, said spokesman Steve McKay.  The company was not asked to insure a payment bond, he said.

Adler said Pitbull has not responded to his requests for payment. The work  was completed more than 18 months ago.

According to Bennett, his attorney said given the cost of filing a separate lawsuit to recover what the company is owed, it might be best to write off the loss.  That is something that Fisher said he can not do.

Piro said the three companies might consider a joint lawsuit to demand payment.

Piro said the school sought proposals for a solar energy project and Sun Edison was selected.

Sun Edison would build and own the system, Piro said, with the school district as the customer. Under the arrangement, Hopatcong schools put no money of its own into the project, so no tax dollars were used to build the system. This is a model for public-private projects that has been repeated across New Jersey.

While this is a project for a public entity, a government or school can not be the owner of such a project because it is not qualified to receive the tax credits or other government-sponsored incentives, Piro said. 

Piro said there were indications during construction that the relationship between SunEdison and SP-One were strained, including missed deadlines and missed payments.

Those issues are detailed in the federal lawsuit.

It was filed on Oct. 25, 2012 by NYT Licenses, a wholly owned subsidiary of Sun Edison LLC, a Maryland corporation.

Rebecca Lazarus, Sun Edison’s attorney, said the company would not comment on the issues because of the lawsuit. Calls placed to SP-One were not returned.

The suit claims that SP-One failed to comply with the general and special conditions of the contract to build the Hopatcong schools solar project. That contract was signed on June 1, 2011. The work was scheduled to take 95 days, or until sometime in September 2011.

“Shortly after the construction began it became obvious to NVT that SP-One had neither the financial or construction capability to complete the Hopatcong Project,” the suit says. “As evidence of these facts, SP-One almost immediately  released its electrical subcontractor for financial reasons, which caused serious delays in construction at the Hopatcong Project.”

A second electrical subcontractor, RCS Construction Services, bid $862,000 to complete the work by December  2011.  RSC was subsequently hired by NYT to complete the project.

Other problems identified in the lawsuit include failure by SP-One to pay for materials, which delayed the project and required NYT to purchase them, that SP-One did  not perform its own work on the project, and what work that company did was done “incorrectly,” the suit says.

As a result, RSC was required to do that work over, repairing the incorrectly done work, the lawsuit says.

“The Hopatcong Project was delayed by several months due to SP-One’s inability to fund its obligations under the General Conditions and Specific Conditions, its failure to complete the work it agreed to do, and its incapacity to perform its work correctly,” the suit says.

Sun Edison had terminated its contracts with SP-One in February 2012 in a letter from Michael Belko, senior director of operations, U.S. commercial systems, to SP-One president Lee Dinenberg.

The termination was based on allegations that SP-One “generally failed to comply with, or has breached, numerous provisions in the agreements,” Belko’s letter said.

Belko also wrote that, “We are in the process of analyzing the current status of the work, payments made to date, and the anticipated costs of completing the work under the three agreements—including ensuring that all of SP-One’s subcontractors have been paid.”

Nine months later in October 2012, NYT filed its federal suit against SP-One.

And the three local subcontractors have not been paid.

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