November

The baggage handling system was working, but only in segments. Frustration still existed in not being able to get the whole system to work at the same time. The problem appeared to be with the software required to get computers to talk to computers. The fact that a mere software failure could hold up Denver's new airport for more than a year put in question the project's risk management program.

Jerry Waddles was the risk manager for Denver. He left that post to become risk manager for the State of Colorado. Eventually the city found an acting risk manager, Molly Austin Flaherty, to replace Mr. Waddles, but for the most part, DIA construction over the past several months had continued without a full-time risk manager.

The failure of the baggage handling system had propelled DIA into newspaper headlines around the country. The U.S. Securities and Exchange Commission had launched a probe into whether Denver officials had deliberately deceived bondholders about how equipment malfunctions would affect the December 19 1993 opening. The allegations were made by Denver's KCNC-TV. Internal memos indicated that in the summer of 1993 city engineers believed it would take at least until March 1994

to get the system working. However, Mayor Wellington Webb did not announce the delayed opening until October 1993. The SEC was investigating whether the last postponement misled investors holding $3 billion in airport bonds.

Under a new agreement, the city agreed to pay BAE an additional $35 million for modifications if the system was working for United Airlines by February 28, 1995. BAE would then have until August, 1995 to complete the rest of the system for the other tenants. If the system was not operational by February 28, the city could withhold payment of the $35 million.

BAE lodged a $40 million claim against the city, alleging that the city caused the delay by changing the system's baseline configuration after the April 1, 1992 deadline. The city filed a $90 million counterclaim blaming BAE for the delays.

The lawsuits were settled out of court when BAE agreed to pay $12,000 a day in liquidated damages dating from December 19 1993 to February 28, 1995, or approximately $5 million. The city agreed to pay BAE $6.5 million to cover some invoices submitted by BAE for work already done to repair the system.

Under its DIA construction contract, BAE's risks were limited. BAE's liability for consequential damages resulting from its failure to complete the baggage handling system on time was capped at $5 million. BAE had no intention of being held liable for changes to the system. The system as it was at the time was not the system that BAE was hired to install.

Additional insurance policies also existed. Builder's risk policies generally pay damages caused by defective parts or materials, but so far none of the parts used to construct the system had been defective. BAE was also covered for design errors or omissions. The unknown risk at that point was who would be responsible if the system worked for Concourse B (i.e., United) but then failed when it was expanded to cover all concourses.

A study was underway to determine the source of respiratory problems suffered by workers at the construction site. The biggest culprit appeared to be the use of concrete in a confined space.

The city and DIA were also protected from claims filed by vendors whose businesses were put on hold because of the delays under a hold-harmless agreement in the contracts. However, the city had offered to permit the concessionaires to charge higher fees and also to extend their leases for no charge to make up for lost income due to the delays.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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