Monticello officials in 2014 entered into a $10 million performace contract to upgrade the city's water infrastructure, but Mayor Zack Tucker (pictured) and others are learning that the meters might not be reporting accurate readings.
An attorney for the city of Monticello was shocked to learn that an Illinois contractor hired for a $10 million water project sued the city on April 21, the very day the two parties were in mediation.
“I was surprised that we were being sued on the same day that we’re supposed to be meeting to try to resolve problems,” said Cliff Gibson of Monticello, the lawyer representing the Drew County seat. “And that’s my comment.”
The origins of the dispute date back to 2011, when Siemens Industry Inc. of Buffalo Grove, Illinois, began looking at the water system in the city of about 10,000 people.
Siemens began installing water meters in 2014, and soon the city was inundated with complaints. City officials said not only were the meters not what they had ordered, but more than a quarter of the meters installed by Siemens needed repairs, according to various letters Gibson wrote detailing the problems. The letters were released under the state Freedom of Information Act.
The city blocked Siemens from continuing to work on the project in October. A mediation session was set for April 21 in Little Rock to discuss terminating the contract and paying Siemens “what, if anything” the city owed for the contractor’s work, according to Gibson’s Jan. 29 letter to Siemens’ attorney Don McKinney of New Orleans. Siemens already had been paid $7 million.
But those talks failed.
Siemens filed its lawsuit in U.S. District Court in Pine Bluff and wants a judge to rule that the city breached its contract by blocking Siemens from completing the waterline project. The company also wants the judge to rule that Siemens can finish the job. Or if that isn’t possible, it wants the judge to award Siemens damages for lost profits and other costs.
The city council voted at its April 28 meeting to countersue Siemens for breach of contract.
The counterclaim would also include allegations that Siemens “improperly installed meters” and note the countless hours city workers spent “fixing stuff that they screwed up,” Gibson said at the meeting. A video of the meeting was posted on the website MonticelloLive.com.
Gibson also said in the letters that Siemens may have committed fraud before the contract was even signed.
Amanda Naiman, a spokeswoman for Siemens, told Arkansas Business last week that she’s not aware of any “current quality issues with the water meters.
“But with the stop-work order, we haven’t been able to do anything …, so we haven’t been able to verify or see anything for ourselves,” Naiman said.
She also said the company wanted the mediation talks to be successful.
“We have acted in good faith and were hopeful that mediation would work,” she said. “It’s unfortunate that we reached the impasse in our contract dispute.”
$10 Million Contract
In the summer of 2011, the city asked Siemens to assess the city’s water system and make recommendations to improve it, according to Siemens’ lawsuit.
Siemens said it found the meters and water pipe network didn’t accurately measure water use, which resulted in the city losing revenue. Siemens also discovered the water pipe infrastructure “was deteriorating, which disrupted service and diverted City resources toward continual repairs,” the lawsuit said.
Siemens made its proposals to improve the system, and after negotiating with the city, it signed in September 2013 a $10 million contract to install 4,300 water meters and repair portions of the water lines in parts of the city.
But now Gibson questions Siemens’ assessment of the water network.
“There is a strong argument that the City was fraudulently induced by Siemens to engage Siemens on a $10 million water project,” Gibson said in an April 28 letter to Monticello Mayor Zack Tucker and members of the City Council.
Gibson charged that Siemens “manipulated the test results on the old meters in order to make the proposed project appear economically feasible,” Gibson wrote.
But it wasn’t until after the contract was signed and the new meters delivered that problems surfaced.
Naiman, the spokeswoman for Siemens, said in a follow-up email that the company “follows a stringent and collaborative process with our customers, and we stand by our work. We cannot comment further on pending litigation.”
Brand of Meters Switched
One of the first public signs of trouble came in March 2014, when Siemens delivered a large number of water meters from the manufacturer Sensus of Raleigh, North Carolina, to Monticello’s warehouse, according a letter Gibson wrote on Dec. 18 to then-Mayor Joe Rogers and council members.
The contract called for the water meters to be the Hersey brand purchased from a Chattanooga, Tennessee, company named Mueller Co.
“The Siemens’ representatives responded that the Hersey meters would not work with the computer software Siemens was installing in the water office, and that the City had no choice but to go with the Sensus meters,” Gibson wrote.
Gibson said that the city was troubled that Siemens would change “the type/brand of the literally thousands of new water meters” without a change order.
But Siemens’ attorney, Steven Shamash, said in an email response to Gibson on Nov. 13 that it “has established that it provided ‘equal’ equipment as expressly called for by the contract.”
Still, it turned out those Sensus meters had problems, Gibson said. Approximately 1,230 meters, or 28 percent, of the installations done by Siemens were defective, Gibson said in an April 28 letter to Mayor Tucker and the council.
“After the leaks associated with these defective installations were corrected, there still remain 84 new meters that are incorrectly or defectively installed,” Gibson wrote.
The city had to pay to replace the dead meters “without any assistance from Siemens. While there is hope that Sensus will cover this, that is all that it is — a hope — as there is no written assurance from Sensus that same will be covered.”
As of Dec. 18, the city’s cost to repair the problems with the meters was about $136,000, Gibson wrote.
In addition, Tucker received complaints about the accuracy of the water meters, according to an April 16 letter he wrote to Gibson.
When an elderly woman reported a bill showing water use that was 85 percent higher than normal, Tucker wrote, a city worker determined that the meter at the woman’s house wasn’t working.
Tucker referred questions about the project to Gibson, who made no comment other than his surprise over Siemens’ filing of the lawsuit.
But in a letter last fall, Gibson said a number of citizens reported water bills several times higher than their previous highest bill. “While some could be explained by water leaks on the customer side of the meter, we understand that the majority of the complaints arise from inaccurate water meter readings from the new Sensus meters,” Gibson wrote in a Nov. 6 letter.
Siemens disputed the claims of higher bills being its fault. “We are aware of no material problems with the functionality of the new meters,” Siemens attorney Shamash said in a Nov. 6 email to Gibson. “We ask the City to consider whether the problem is not with whether the new meters are inaccurate, but instead whether the old ones were.”
Siemens said it stands behind its products and supplies. And the company “remains ready, willing and able to honor all of its contractual obligations in this regard,” Shamash said.
As of Wednesday, the city of Monticello hadn’t filed a response in federal court.
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