When the Nevada Department of Transportation ended its contract with a Wisconsin company last spring to build the Galena Creek Bridge that's critical in completing the freeway between Reno and Carson City, several subcontractors suddenly found themselves on the short end of the payment stick.
One of the most vocal is Reno Iron Works, which subcontracted with Edward Kraemer & Sons to provide material and labor for three smaller bridges. When Kraemer was allowed to opt out of its $80 million contract for the four bridges, Reno Iron Works was among those subs who are still owed money.
"Let's just say that we are still owed in the six figures," says Ralph Shindler, chief executive officer and general manager for the century-old steel fabrication and erection company.
Shindler says he does not know how many of the 20 to 25 subcontractors on the project were hurt financially.
"Some were probably happy to just get out," he says, "but I suspect there are several who have the same taste in their mouths as I do."
What particularly upsets Shindler is that he says his company has not received any assurances from NDOT that they are looking into whether Kraemer paid its subcontractors.
"We are not aware of any follow-up on NDOT's part to see if any or all of the subs were paid," he said. "Usually on a project of this kind, one of the things a general contractor has to do is provide all the lien releases. Here it is the new year and we've still had no contact from NDOT and, yet, every single lien release we've sent in to Kraemer indicates how much money is still owed to us."
Scott Magruder, a spokesman for NDOT, says there may have been a communications breakdown with some of the subcontractors, including Reno Iron Works, and said the state is working to ensure all subs that worked for Kraemer are paid. "The bottom line," he says, "is that the agreement we have with Edward Kraemer and Sons to terminate the actual contract involves the part of the contract that says all of the subs are paid before we close it out. The contract (with Kraemer) has not officially been closed. If there are any differences or discrepancies, it will be worked out."
Kraemer pulled its crew and machinery off the Galena job site in May and was reportedly paid $46 million of the original $80 million to build the four bridges that are part of the I-580 freeway.
The state recently awarded Fisher Sand and Gravel of Dickinson, N.D., a $393 million contract to complete the project, nearly $100 million more than the original estimated cost when Kraemer received the contract.
Adding to the financial burden felt by Reno Iron Works is a sharp increase in materials prices.
When it bid on labor and materials for the Browns Creek, St. James and Corey Canyon bridges, rebar was selling for 12 to 13 cents a pound. Within a matter of months after the bid was accepted, the worldwide price of steel catapulted.
"We saw a 300 percent increase in steel costs, and the state told us there was no escalator clause, that any cost overruns we incurred, we would have to eat," Shindler says. "A group of us that included several other subs and Granite Construction met with Gov. Kenny Guinn. While he sympathized with us, he said there was nothing the state could do."
Shindler says Reno Iron Works, like most steel fabricators, typically put bids together that account for a small increase in materials.
"But none of us ever thought we would see 300 percent increases in steel over this period," he said. "It was unprecedented."
Since that meeting, however, Shindler says the state has agreed to write escalator clauses into any new contracts.
Still, Shindler says the health of Reno Iron Works today is quite good and the company has a backlog of solid orders stretching out to November.
"Usually, we are running with a four- to five-month backlog, but the economic outlook in our area is very strong. We are committed to projects in the Bay Area, Sacramento, and down to Mammoth for select clients," he says. "We are working with strong, selected customers who we know are solid."
